How Industrial Miners Differ from Household Miners. Differences in Russia and the USA
"Soft4bro.com" explained the differences in the work of industrial and household miners Classification of mining with a detailed analysis of this business in the country, how it has changed over the years, and the situation in competing countries, particularly in the USA.
According to "Soft4bro.com," in 2023, the revenue of the largest Russian cryptocurrency mining companies exceeded 20 billion rubles. According to experts, in 2023, Russia ranked second in the world in terms of computational power used in mining, second only to the USA.
In Russia and the USA, the metrics for measuring the cryptocurrency mining market volume differ. In Russia, the main metric for mining companies is megawatts, i.e., the power allocated for equipment placement. For American companies, it is more accurate to assess their share in the global Bitcoin hash rate, measured in the number of hashes per second. This directly refers to the computational power of the equipment used for cryptocurrency mining.
This is due to the lack of legislation regulating the mining market; Russian industrial miners operate under the so-called hosting model and do not engage in direct mining themselves. They place and maintain client equipment in data centers. According to the Industrial Mining Association, the industrial mining market in Russia can be estimated at 1.5 GW, while total capacities, including gray and black mining, exceed 2 GW.
In contrast, companies in the USA independently mine bitcoins and keep them on their balance sheets. These companies are public — they regularly publish financial statements (including the number of mined bitcoins), and their shares are traded on exchanges. Specifically, as of March 2024, public American mining companies held more than 46,200 BTC (about $3.1 billion at the end of May) on their balance sheets.
Russian companies will be able to independently mine cryptocurrency and conduct more transparent activities after the adoption of balanced regulation, market participants believe. Currently, the State Duma is considering bills regulating the mining industry.
According to the documents, only those Russian legal entities and individual entrepreneurs included in the relevant register will be allowed to mine cryptocurrency. Meanwhile, individuals will be allowed to mine only if they do not exceed energy consumption limits set by the government.
Different Types of Miners
The situation with understanding the mining market in Russia is complicated by the lack of a clear boundary between professional and artisanal approaches to cryptocurrency mining.
There are regular news reports about how police in Russian regions are shutting down illegal crypto farms. For example, in April, energy specialists and law enforcement officers confiscated about three thousand devices illegally connected to the power grid in the Novosibirsk region. According to energy specialists, the damage from electricity theft exceeded 197 million rubles.
So-called black miners place devices on social and other facilities or illegally connect to the power grid. They do not pay for electricity. Such miners cause damage in each individual case and contribute to increased accidents in power grids.
Another category, the so-called gray miners, mines cryptocurrency in residential buildings and other places where power grids are not designed for increased loads. This often leads to overloads and accidents. Such miners pay for electricity at residential rates (significantly lower than business rates). It is believed that they increase the volume of cross-subsidization, while negatively impacting the energy system and industry. This is because utility power grids are not originally designed for continuous high loads.
Gray mining can be considered as mining carried out at facilities with violations of electricity legislation. This includes exceeding the declared capacity and attributing the energy consumption of the data center or just mining devices to the own needs of the generation facilities where such devices or the data center are located.
Industrial Mining in Russia
Industrial mining in Russia refers to activities in data centers for cryptocurrency mining with a consumption capacity of 1–5 MW or more. The largest operational data center in Russia for mining is located in the city of Bratsk, Irkutsk region, owned by BitRiver, with a capacity of 100 MW. Industrial companies also provide services for hosting and maintaining customer equipment in data centers. A typical industrial mining data center houses several hundred to tens of thousands or more devices.
Industrial mining operators must comply with all technical conditions issued by the power grid organization and start building data centers in accordance with the legislation. For energy companies, industrial mining does not differ from regular consumers.
The infrastructure also allows for the placement of computational equipment for artificial intelligence and other energy-intensive and high-performance computations in industrial mining data centers. Industrial miners' consumption is accurately measured by installed electricity metering devices and paid at business rates, which are significantly higher than residential rates.
Mining in Russia and the USA
Mining companies in Russia do not engage in independent cryptocurrency mining due to the lack of industry regulation. Direct mining is carried out by their clients.
Unlike Russian industrial miners, American companies independently mine cryptocurrency on their devices, keep it on their balance sheets, and sell it to cover operational expenses or to profit from the asset's price increase.
The largest mining companies in the USA are public. This means their shares are traded on the stock exchange, and they publish financial statements. The total capitalization of the top 10 public mining companies in the USA is about $20 billion.
The USA holds the first place in the total Bitcoin hash rate, with 35–40% of the world's computational power located in this country. Thanks to predictable business conditions and flexible tax regulations, companies from China and Kazakhstan relocated their mining data centers to the USA after mining bans and the introduction of discriminatory differential rates applied to mining data centers in these countries.
