Bitcoin Mining Farms Are Flourishing on the Ruins of Soviet Industry in Siberia

The Takeaway:

  • Russia’s abandoned Soviet-era factories are enjoying a second life as cryptocurrency mining facilities.
  • Siberia’s big hydropower plants (another legacy of the USSR) have lured miners with cheap electricity.
  • The favorable energy prices and naturally cold climate are turning Siberia into an international mining hub with miners from Europe, Asia and the U.S. placing their rigs in local farms.

Built during the Cold War to power Soviet manufacturing, the Bratsk hydroelectric station in Eastern Siberia is now fueling another energy-hungry industry: Bitcoin mining.

Several large mining farms have set up shop in Bratsk, an industrial city on the bank of the Angara River, taking advantage of the region’s low temperatures, which keeps cooling costs down, and the hydro plant’s abundant, inexpensive electricity.

Bratsk is an example of how the ruins of the Soviet empire have become fertile soil for new, somewhat exotic flowers. After the USSR collapsed and parts of the huge, mostly military-oriented industrial sector started to wither in the chaos of the nascent market economy, many factories had to shut down.

In recent years, miners have taken up some of the slack.

Bratsk hydropower plant (Photo by Anna Baydakova for CoinDesk)

“The surplus of electric power in Russia is huge, due to the closure of some of the Soviet plants and to the fact that energy consumption, in general, became much more efficient over time,” said Dmitry Ozersky, CEO of Eletro.Farm, a mining company building a large venue in Kazakhstan.

As a result, Bitcoin mining farms across Russia now wield a joint capacity of 600 megawatts, accounting for almost 10 percent of the total 7 gigawatts of power supporting the Bitcoin network worldwide, said Ozersky, a former banker and top manager at the Russian state corporation Rusnano. His estimate is based on data from manufacturers of specialized mining chips, known as ASICs.

This number, accounting for about 7 percent of the total hashpower of the Bitcoin network, might be 20 percent lower taking into consideration older and less productive miners, Ozersky notes. By comparison, farms in China, widely regarded as the world’s mining capital, account for around 60 percent of the total network hashpower, according to the recent report by Coinshares.

To be sure, Siberia still has a considerable amount of industrial production, including metals and wood. But the plants that were allowed to die left behind buildings, land and power infrastructure ready for miners to use, turning the region into an international mining hub.

Multinational containers

Driving around a fenced area on the quiet outskirts of Bratsk, we can’t find an entrance. The concrete walls and metal gates bear no signs: only authorized and expected guests can enter.

My accidental driver, Ivan Kaap, is the head of security at a large mining facility in Bratsk called Bitriver, but we’re visiting his company’s smaller competitor, Minery. We call the CEO and he lets us in, to a fenced piece of land with 26 metal containers, buzzing loudly and covered with rotating fans.

Minery’s mining farm in Bratsk (Photo by Anna Baydakova for CoinDesk)

Inside, a group of men and women are hiving around the CEO, Ilya Bruman, fussing about the souvenir T-shirts he’s handing out. Chinese, Korean, Japanese, American and Brazilian entrepreneurs have come to Bratsk to tour the local mining facilities.

Sam Chi, president of Landmark Entertainment Asia, which is mining Bitcoin to fund its operations, points at two containers where his own ASICs reside. Asked why of all places he chose this one (in a part of the world that was once synonymous with “exile,”) he said he liked the level of security Minery offered.

Chi told CoinDesk:

“I want to sleep well at night.”

Pablo Lobo of Sthorm, a company which mines Bitcoin to fund a research lab, gave another explanation: Siberia’s climate makes it a no-brainer for choosing a mining host, providing natural cooling for most of the year. Sthorm hasn’t placed ASICs at Minery yet, but is considering it as an option, he said.

The average temperature in winter in Bratsk is around 0 degrees Fahrenheit. In summer, it can get as hot as 77 degrees but mostly stays around the 60s, and the warm season (meaning when it’s not freezing) lasts four or five months a year. The average annual temperature here is 28.

Minery has two venues around Irkutsk with a total capacity of 30 megawatts, says Bruman. The one we’re at can handle 10 megawatts and still has space for new clients; the other one is fully occupied by one client, he said.

Ilya Bruman, CEO of Minery. (Photo by Anna Baydakova for CoinDesk)

The clients come from the U.S., Russia, Korea, India, Japan and Spain, Bruman says. According to him, two days before we met, the venue accepted 550 more ASICs shipped by a client from Korea, and over the first night, the machines produced half a Bitcoin, worth about $5,000…

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