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How Does a Data Center Operator Know a Potential Mining Tenant is Legit?

Oct 16, 2018
by Josh Anderson

DENVER, CO – Many would say that blockchain is driving the data center conversation, especially in regions such as the Mountain West, where the bitcoin business is booming. And some would go so far as to say that crypto-currency more specifically is driving that conversation.

data center summitSo CapRE’s Second Annual Great Denver Data Center Summit last week featured a panel titled “The Next Chapter: Blockchain, Cryptocurrency and Bitcoin: What are They and How Do They Impact Data Center Design, Construction, Development and Operations?” and the conversation featured some remarks and a question by Moderator Rabin Mahanty, Director, H5 Data Centers about how data center developers should approach crypto-deals.

“One of the questions I have as a data center provider, is that we are inundated with a flood of crypto-miners,” he shared. “We get emails from crypto-kevin@gmail.com saying that he needs a megawatt. Right away. And you’re like, okay, well, what number do I call you at? Then you pass it off. So how do you differentiate from someone like that, the stereotype of blockchain providers, and convince someone that you’re not crypto-kevin@gmail.com?”

Arland Whitfield, CEO of Frontier Mining offered a response to that question. “Our biggest differentiator that we have is a parent company that has been in this business for 25 years. We have staff,” he shared. “This is just another play in our playbook. We host already for clients and this is an extension of that. We’re just helping people do that.”

Arland Whitfield, CEO, Frontier Mining

“I started in the drone space,” continued Whitfield. “And when I started in the drone space, there was all that FAA-drama about can you fly commercial or can you not? At that time, the only people in that space were hobbyists in their garage. And they’re the ones being asked to go onto tarmacs and professional film sets and fly these machines that have sixteen-inch carbon fiber blades spinning at a certain number of revolutions per minute. And I think the discrepancy is that the industry is so young that the industry is still in that hobbyist phase.”

In other words, according to Whitfield, the people that are currently in the space and have been in the space for four or five years are the hobbyists at home that have a farm in their living room. “And they kind of got swept up in the wave when Bitcoin went up to $20,000 USD,” he explained. “There was suddenly this demand for people they were friends with – can you build these rigs, can you get us more power, can you do this? Then they turned and started hitting up data centers and asking for a megawatt, with no real business plan or experience.”

According to Whitfield, there is definitely going to be a period of time when we are going to have to vet our tenants and find out what their background is. “We deal with a lot of crypto people on a daily basis and we host for clients that ask for pretty weird things about their rigs – can they turn them off whenever they want, how are they going to stay charged, and you just don’t know if they’re going to be there tomorrow,” he shared with chuckle. “That’s the biggest concern about financing a data center around this idea.  You want to make sure that they did their homework.”

Be sure to check out further perspective from this panel on blockchain and bitcoin in previous CapRE Insider Reports:

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