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Cryptocurrencies and the data centre: part one

The first part of this series, we take a look at the opportunities and potential obstacles for data centre operators, customers and technology suppliers from developments in the world of cryptocurrencies.

The direction of travel in the data centre industry is increasingly away from generic facilities with mixed IT loads towards application-optimised designs. Efficiency and productivity can be dramatically improved by physical infrastructure that is designed and managed for specific workloads and applications.

One class of workload that has seen a significant increase in dedicated data centre capacity recently is so-called cryptocurrencies. Best described as a ‘medium of exchange’, rather than currencies per se, they are not usually backed by a legal entity or government as with traditional currencies. Instead cryptocurrencies rely on the use of public key cryptography to secure communication between two third parties. The first and most well known recent example is Bitcoin but there are now believed to be more than 800 other types of cryptocurrency with the whole market being worth an estimated $60 billion.

Compute and energy intensive

The relevance and importance from a data centre perspective is related to the huge compute capacity required to create and transact new units of cryptocurrency. For example, there are believed to be approximately 16 million Bitcoins in circulation with around 1800 new units minted or mined every day. Producing each new Bitcoin requires increasingly large amounts of compute power and energy.  Calculating exactly how much compute capacity is challenging however as the complexity of the process to create a unit of Bitcoin is constantly shifting. However according to the Digiconomist Bitcoin Energy Consumption Index, the annual energy use of the entire Bitcoin network – in so-called ‘hashing centres’ – is approximately 19 TWh. It has also been pointed out that Bitcoin is significantly more energy intensive than an established payment network such as Visa while handling a fraction of the transactions.

Opportunities and obstacles

Cryptocurrencies present a number of direct and indirect opportunities for the data centre and wider IT industries.

• Requirement for IT infrastructure: The mining and distribution of cryptocurrencies has obviously created a huge demand for commodity but also specialist IT infrastructure. A whole ecosystem of specialist cryptocurrency IT suppliers has emerged supplying everything from custom silicon to integrated systems including modular data centres. The total annual costs of Bitcoin mining, estimated to be more than $900 million, gives an indication of the overall opportunity for technology suppliers and services companies.

• MTDC capacity: A significant proportion of miners opt for self-owned dedicated data centres (ranging in size and quality) to support their operations but others have also opted to use multi-tenant data centre (MTDC) facilities. For example, some MTDC sites in the Nordics have depended on Bitcoin miners as anchor tenants.

• Technology transfer: Some of the IT but also mechanical and electrical (M&E) infrastructure designs pioneered by the cryptocurrency industry may be transferable to other adjacent areas such as High-Performance Compute (HPC) but also potentially into the mainstream data centre industry. For example, immersion direct liquid cooling specialist Allied Control was acquired by cryptocurrency mining services and technology provider BitFury in 2015. BitFury has indicated that it plans to apply the technology to adjacent areas such as HPC where liquid cooling is already established. Future-tech has also seen growing demand for the high-density cooling technology and undertaken a number of M&E designs to support direct liquid cooled systems. (Note: These will be explored in more detail in the second part of this series.)

• Blockchain. The public ledger technology that underpins Bitcoin is gaining traction in other industries. This could eventually enable a plethora of new digital transactions and cloud services with a technical and societal impact that grows well beyond Bitcoin.

However, cryptocurrencies, and the technology used to support them, may also present some obstacles for data centre operators and technology suppliers.

• Volatility: While some MTDCs have benefitted from cryptocurrency customers others have been embroiled in legal disputes with tenants. While legal issues between MTDCs and their customers are not confined to the cryptocurrency space, price volatility and the fact that cryptocurrencies are still relatively nascent introduce additional risk factors.

• Regulation: Some countries such as South Korea and China have recently introduced curbs and controls on cryptocurrencies. China is believed to house a significant proportion of global mining operations so an outright ban could be potentially damaging to cryptocurrency networks – at least in the short term. However others believe the network would be resilient enough to bounce back.

• Distributed mining: It has also been suggested that in the long term there may be move back towards the early days of cryptocurrency when the majority of the mining was distributed across networks of desktop machines rather than centralized in data centres. While it is not clear if the distributed approach could enable similar levels of mining capacity to centralized data centres, the approach has some upsides. Firstly, the concentration of mining capacity in dedicated large data centres introduces potential points of failure into the network. A secondary but less obvious benefit is that the heat produced by dedicated mining compute could be more efficiency reused using a distributed network approach. For example, a Ukrainian company has developed a mining rig that doubles as an in-house water heater.

Future developments

Despite on-going volatility in the price of Bitcoin and other cryptocurrencies demand and growth continues to be strong. This has translated into continued requirement for new data centre capacity. For example, Future-tech has completed four designs for cryptocurrency sites in the recent past and expects to see more in the future. Other examples include the aptly located Lefdal Mine data center – one of the largest sites in Europe with more than 120,000 square meters of whitespace – that is believed to be used, at least in part, for cryptocurrency mining. Another recently announced site in Georgia – nicknamed the Golden Fleece – will have a capacity of more than 20MW if it goes ahead.

Cryptocurrencies may also have an indirect impact on overall data centre design. The facilities required by cryptocurrencies in the main require lower levels of redundancy compared with mission-critical facilities. Effectively the total spend of the facility is heavily skewed towards the IT equipment with less requirement for the kind of concurrent maintainability of traditional enterprise of MTDC sites. As such, while there is still a significant opportunity for specialist services companies (data centre engineering specialists such as Future-tech), there is less need for redundant generators, UPS, and other equipment from data centre technology suppliers. Over time, the adoption of low-redundancy designs by the cryptocurrency industry may also serve to normalize the approach. This could contribute to an ongoing revaluation of redundancy requirements for more mainstream sites and the need for new flexible designs.

Part 2 of this series will look in more depth the specific facilities design and citing requirements for cryptocurrency data centers.

If you would like to learn more about workload specific data centre design or discuss the impact of cryptocurrency-optimized infrastructure in your data centre contact us on