I had the pleasure of interviewing the Chief Technology Officer at Bitcoin Brothers, Thomas J. Ackermann. Bitcoin Brothers is the technology leader in Industrial Bitcoin Mining.
Allen Scott: So how do you solve the problem of power? I imagine electricity costs to be very high in Germany.
Thomas Ackermann: What we do is deploy all the machines in Iceland where power is cheap and is 100 percent green. You have natural cooling so that’s also 100 percent green and power is easily available. We have 200 MW ready to use. The power is also comparatively cheap. It’s about 50 percent less than the lowest price you can get elsewhere like in the US for example.
AS: Yeah, I believe it’s something like 4 cents per kWh in Iceland.
TA: Yeah roughly, and we get discounts. If we deploy 50 machines and each machine draws 2 MW and we have a 3-digit PH capacity – the economy of scale works in our favor so that we get increasingly bigger discounts on the power costs. So we kill two birds with one stone there: it is green and we get it cheap.
AS: Speaking more on Iceland…their government actually forbids Bitcoin payment transactions but many people suggest that mining will not be affected. Do you foresee any problems operating there?
TA: The regulatory issues are of course one thing but Iceland doesn’t look at as a Bitcoin miner. They just see us as a huge customer that does number-crunching basically. The mining itself does not involve financial transactions so we don’t face any regulatory issues. We’re not selling the machines; we’re just using the machines and selling the services. We sell the capacity to people who want to mine. In the future, as Bitcoin becomes more accepted there will be a huge demand to process all those payments. So in the long-term, we’re looking to be the only player who can support customers like Amazon or Alibaba and other large merchants.
AS: Is your solution geared more towards the large merchants and companies or small businesses as well?
TA: The larger merchants are the watershed. Supporting smaller merchants is not a big deal because you can pick and choose and deploy the smaller machines. We certainly want to resell capacity to other markets and to companies who don’t want to be the dominant player. We certainly will be the market leader as soon as we launch but we need healthy competition. And we will be able to support the really big one but certainly the medium to small-sized service providers as well. So if you have a small operation, you can’t really support a merchant like Amazon. And if Bitcoin eventually replaces services like Western Union and other payment processing providers, the sheer volume of transactions will require a huge amount of computing power and we’ll be ready for it.
AS: What about other alternative currencies like LiteCoin or Dogecoin? Are you planning to mine other currencies in the future or are you just focusing on Bitcoin?
TA: Well, our focus is on Bitcoin. The hardware is adaptable and can support other hashing operations; however, we try not to get sidetracked. Depending on how the future unfolds, we can kind of side step and do other coins but our current focus is on Bitcoin since it’s by far the largest of all the crypto currencies with the largest capitalization, and is the most distributed and accepted within those crypto currencies. So I believe Bitcoin is most likely to succeed in the long-term. Since other currencies are small compared to Bitcoin, they don’t justify the investment that’s needed at this point.
AS: While unlikely, would you consider shifting the focus of your company towards Litecoin, for example, if people start switching towards a “better” alternative currency?
TA: We don’t have any plans but we would be flexible enough to do it. Our machines are built for long-term use and all components are recyclable so should there be other developments in the future towards other crypto currencies, we can shift our capacity as well.
AS: What gives your company a competitive edge over companies like KnCMiner for example?
TA: Well our chips are much better, they use a lot less power and they’re available – we can start making those wafers tomorrow. Our cost of operation is very low so we can sell the capacity way below the price of our competitors. So we operate at a fraction of the cost compared to KnCMiner which at least makes its own chips – not very successfully unfortunately.
Not to play them down, but they do have a problem with that. The cost of operation that they have in Sweden is high and they can’t bring power to their data-centers very quickly and only very expensively. In Sweden, the green power that they use costs them something like 30 cents per kWh. It’s really, really expensive. So while it technically works, it takes a much longer to time to deploy and, from a business point of view, not very profitable to run. We certainly don’t want to put them out of business because we need a healthy competition but there is two or three other big companies, Cloud Hashing that is buying everyone else’s chips; they’re also housing their operations in Iceland, which makes the most sense, however, they’re buying other chips that are not as efficient as ours. Beyond Cloud Hashing and KnCMiner there is very little left
AS: So the Bitcoin Brothers is completely self-sufficient in terms of production and energy as opposed to your competitors?
TA: We’re the only one who can deploy the same kind of hash power that’s already on the market. Currently, it peaks at about 50 PH globally. And we’re the only company who can deploy the same amount or more within a few months. None of the other competitors can do that at all.
AS: Are you considering any other locations for you data centers in the future?
TA: We are. As the operation grows, we’re planning to not put all the eggs in one basket. So we’re going to look into other locations where the same favorable conditions exist as in Iceland but that’s like way down the road [laughs]. You also have to consider that as these things grow, they take up a lot of space and there are physical limits to build these machines.
AS: Yeah, Iceland might be too small in the long run [laughs]. OK, that about wraps it up for now. Thank you for your time and we’ll be looking forward to seeing how your machines will change the mining scene in the near future.
TA: Yeah, great! Thank you very much for getting up so early [laughs]
Thomas has been a serial entrepreneur since 1987, when he started his first company while pursuing studies in law, macro-economics, and business administrations in German and US universities. While working in the USA, he participated in Silicon Valley during the Internet revolution.