Current investments in mining will return in 35 months: Oles Slobodenyuk, Hotmine CEO
If investments in mining returned in 2-4 months in 2013, then current investments would return in approximately three years. This is the opinion of Oles Slobodenyuk, CEO at Hotmine – a Ukrainian company developing mining equipment. In an interview, the expert reveals what affects mining today, what challenges can be faced while designing new equipment, and why it is better to focus on artificial intelligence rather than cryptocurrencies.
September 19, Hotmine will be a sponsor of the largest Ukrainian blockchain event – Blockchain & Bitcoin Conference Kyiv.
Interviewer: Blockchain & Bitcoin Conference Kyiv (BCK).
Respondent: Oles Slobodenyuk (OS).
BCK: What triggered the establishment of a company developing mining equipment?
OS: In August 2013, Valery Nebesny (a co-founder of Bitfury) presented the ASIC off-the-shelf processor for counting the SHA-256 hash function that calculates bitcoin. Afterwards, there was a tender for choosing a company that will be able to design rapidly the end device based on the processor.
This was the impulse to make equipment for calculating hash functions of bitcoin mining. We were one of the first to obtain a first prototype of a 55 nm chip, which was 300 times more powerful than the top video card used for bitcoin mining in 2013.
We received records on how to work with the chip; it was an opportunity for us to beat the market. Back then, Ukraine had so many chips that they occupied 70% of entire mining capacity of the bitcoin network. I stressed that it referred only to bitcoins.
BCK: What has changed since that moment in cryptocurrency mining?
OS: In 2013, we saw a short period when the reward for one block was 50 BTC. Then, the entire network mined approximately 216 000 BTC per month. The network capacity and complexity has significantly changed, resulting in changes in the amount of the reward: 216 000 BTC, then 108 000, and now 54 000 BTC per month.
Besides the capacity and complexity, the equipment energy efficiency has also changed. In 2013, one started commonly using 55 nm chips; in 2014, one transferred to 15-28 nm chips, and in 2016-2018, 16 nm chips became the basis for mining equipment. By the way, the price of bitcoin substantially grew.
BCK: What challenges did you face during company operations?
OS: The main difficulty was to learn how to work following the concept of yesterday’s mining. We usually began in such a way: there was a tender; we had to choose three-five suppliers and the best (minimum) price of deliveries.
At that time, we thought that the best and minimum prices are synonyms. But the practice showed that the price strongly affected future earnings. We had to work six weeks using the minimum price concept to realize this fact.
Six weeks later, we shifted to the yesterday’s mining principle. In other words, it is better to spend thousand dollars more today in order to earn more eventually. Obviously, we analyze the energy efficiency, cost of 1 TH/s, and time of investment return.
BCK: How did you manage to succeed in a competitive environment among mining equipment manufacturers?
OS: To succeed in mining equipment production, you should put together you own team of electronic engineers, testers, and programmers, the so-called R&D team.
Moreover, you should have an access to chips in advance and keep in touch with their manufacturers. However, I would like to specify that we are more successful in the development of mining equipment rather than in its production.
BCK: How do you analyze the market and relevant trends to design innovative equipment?
OS: We analyze the bitcoin market: it can be done based on blockchain. Important characteristics include the capacity and complexity of the network, as well as the energy efficiency of hardware. Therefore, relevant trends mean the most energy-saving equipment and the cost of 1 TH/s.
It is not even innovative equipment that matters, but capital expenditures: investments in hardware, the cost of 1 TH/s, profit from 1 TH/s, and the fastest return on investments. In 2013, the return on investments took 2-4 months. Currently, investments are returned much faster.
One should focus on the cost of energy consumption as well. At the cost of $0.05 per kWh, the return on investments was 2-4 months in 2013. At the cost of $0.05 and the current complexity, investments are returned in more than 35 months in 2018.
BCK: Are you going to develop mining equipment not only for bitcoins?
OS: Indeed, we are going to mine other currencies besides bitcoin, and we are already implementing this aspect. Our solution is a data tank or a pressure vessel. It is designed for placing any type of electronics and processors that can calculate not only SHA256 function.
But now, it is better to develop in AI and supercomputer sectors instead of cryptocurrencies. We can see this very trend. Supercomputers are occupying lots of space today, and we have developed the data tank for 100 kW requiring 0.5 sq. m.
BCK: Tell us about mining boilers. How did you come up with an idea of designing such a product? What is its operational concept?
OS: We created a mining boiler in 2013. The idea appeared when the chip creator said that it would be cool to heat the house using processors. Thus, we designed the first-generation mining boiler by joint efforts.
First mining boilers were approximately for 250 kW. It was enough for eight houses (more or less 30 kW for heating each house).
The boiler’s operational concept is the following: processor’s heat is transferred to water using a special radiator, while water is circulated through a heating system, warming the house. The point is that you mine without paying for house heating.
BCK: What other unique products and solutions does your company offer?
OS: We have created a fun project: a mining lamp. Besides, we have a unique product: a system for monitoring and controlling miners. Moreover, we are designing a data tank for the industrial application: heating of greenhouses, farms, schools, and high-rise buildings.
We already have standard projects for data centers: for 20 kW, 1 MW, and 2 MW.
BCK: As a sponsor of Blockchain & Bitcoin Conference Kyiv, tell us how important are similar events for the Ukrainian crypto industry?
OS: Such events allow us to share our knowledge and experience with guests, as the Internet provides too much complicated and contradictory information. We share objective information: not empty figures but practice established for years by analysis, development, and testing.
Register to Blockchain & Bitcoin Conference Kyiv and discover more about mining prospects.