Managing a Cryptocurrency Mining Farm
“Cryptocurrencies will make the most impact in countries that don’t have stable financial industries. Even the most disconnected economies can connect,” said James Thommes, Co-Founder and Chief Operating Officer of Bit Capital Group. “Crypto puts the power back into the hands of the money holders, not the intermediaries.”
Thommes, a former colleague of his, Jimmy Odom and former NFL player Israel Idonije, founded Bit Capital Group (BitCap) in 2017. BitCap leverages general-purpose hardware to construct and manage cryptocurrency mining computers for their clients. In what they call a mining farm; the team builds, monitors and maintains cryptocurrency mining rigs. Providing end-to-end mining management, BitCap’s clients are paid daily the revenues generated from their own hardware.
We sat down with Thommes to learn more about cryptocurrency mining, his take on blockchain and cryptocurrencies as well as how he got into these markets.
The Rabbit Hole
Thommes’ career path took him from an Apple store in Schaumburg, Illinois to law school at St Louis University, before discovering cryptocurrencies.
“My dad was the one that got me into Bitcoin. He follows the libertarian news sources where Bitcoin first appeared and gave me a couple hundred bucks to invest,” said Thommes. “I opened an account at Mt. Gox, based out of Japan, and at the time the only way to get the crypto was to moneygram it to myself. Sure enough, I received a few Bitcoin and that is when I fell down the rabbit hole.”
Thommes’ rabbit hole included mining Litecoin.
“I built a computer in 2010 to play video games and ended up using it to mine Litecoin,” he said. “Instead of allowing my computer to go to sleep, it would execute a mining program. I then reinvested my profits to purchase more powerful GPU’s.”
Crypto miners have been leveraging GPU’s to mine cryptocurrencies since as early as 2009 in Bitcoin.
“GPUs, or video cards may be the most important piece of hardware out there right now. You can use them for crypto mining, AI/machine learning, offsite rendering, etc. ” he said. “I think they will replace or be as coveted a resource as cloud storage is now.”
Coins are created or “discovered” through mining operations. While traditional fiat money is controlled by the government and simply printed when more is needed, cryptocurrencies are similar to gold or silver-backed currencies. They are created via computers competing through blocks of calculations.
When a coin is transferred from one owner to the next, it is recorded on the blockchain network. Blockchain manages the information by collecting all of the transactions made during a set period and creating a list called a “block.” The coin miner is responsible for verifying and confirming these transactions as well as writing them into a general ledger viewable to the world.
“My first iteration of providing a mining and hosting service was in 2014 at a company called Cointersect,” said Thommes about his first company that built and maintained custom mining farms to secure decentralized digital currency networks.
“However, the energy costs were too high and I couldn’t afford to host other people’s hardware, which is why I moved to Washington State.”
With lower expenses, he could operate at scale and still have room for margin.
“Cointersect was a learning experience and an incubator for what BitCap is today.”
Bit Capital Group
Teaming up with Jimmy Odom, a former colleague from Thommes‘ days at Apple, and former NFL defensive end Israel Idonije , the group founded Bit Capital Group in 2017.
“After sharing my success mining with Jimmy Odom between 2015 to 2017, we were able to approach an investor, Israel Idonije, and build a state-of-the-art data center to build a hosting company for others who wanted to get a piece of blockchain tech. If you have a cryptocurrency mining machine, send it to us and we will send you the revenue. ”
Bit Capital Group boasts an open-air frame design for the rigs that enables quick heat dissipation to ensure the hardware is running stable and cool. BitCap accounts can be configured to deposit various digital currencies to any wallet in the world. The custom mining rigs are designed to support 6 GPUs and deposit directly to their client’s accounts. They do not hold coins.
“We have about 100 slots left in our first warehouse in Washington State for people that want to get into mining but don’t want to pay their power rate. ” he said. “ We will mine the crypto that is doing the best and sell that asset for Ethereum or Bitcoin - it has been predominantly Ethereum over the past few years , but in recent months, we have seen many new blockchains compete to be the most profitable.”
In closing, I asked Thommes what drew him to mining cryptocurrencies.
“It’s important to participate in the mining of cryptocurrencies because it is the backbone of their success. Miners are incentivized to keep a blockchain secure through the distribution of new tokens that are rewarded to the miners. So you are simultaneously being paid for your work while also participating and ensuring the technology’s success.”
He also believes in the importance of a broad and diverse group of stakeholders.
“The more decentralized a cryptocurrency is, the more secure the entire network is - mining is the vehicle behind achieving wide distribution.”
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