For Josh Garza, the path to the future of crytocurrency mining runs through the cloud.
Garza is the CEO of GAW Miners, which has retooled to track the rapid evolution of the Bitcoin market, shifting its business from the physical to the virtual. After building one of the largest online retail stores for cryptocurrency mining hardware, GAW Miners has bought up data center capacity and launched a flurry of new “Hashlets” providing cloud-based data crunching power to Bitcoin enthusiasts.
GAW Miners’ move reflects a new reality: the Bitcoin technology arms race is shifting from the processor to the data center, with hardware vendors pointing their businesses towards the cloud. This week KnCMiner said it was getting out of retail sales and unveiled a new cloud mining service powered by its new data center in Lulea, Sweden, while Bitmain announced a new mining platform operating from a large facility in China.
ASIC refresh cycles drive rapid change
These companies make specialized chips known as ASICs (Application Specific Integrated Circuits) that process transactions for virtual currencies. Over the past 18 months they’ve released a series of powerful mining rigs, creating a rapid refresh cycle that has shortened the useful life of earlier models. After a turbulent period in which ASIC vendors focused on retail sales, many are now installing their hardware in data centers and selling mining capacity, known as “hashing power.”
“I saw that shipping hardware to people wasn’t going to last forever, so I worked on a plan to migrate our business to a cloud model,” said Garza.
When GAW launched its Hashlets cloud offering on August 15, the volume of orders was large enough to briefly knock the Shopify e-commerce network offline. “We had a huge amount of sales,” said Garza. “We had to slow down because we were running out of data center capacity.”
Bucking industry trends
GAW Miners has made waves by bucking prevailing trends in the Bitcoin sector, where hardware is often delivered late, and sometimes not at all. Garza, a veteran of the telecom industry, believes GAW Miners can set a new standard for business practices, as well as serve as a consolidator in a fragmented industry.
“I got into (mining) as a hobby, as a lot of people do,” said Garza. “I ran into some unsavory companies and lost money on a couple of deals. I just wanted to create an alternative so people could do business with confidence. And it kind of exploded.”
Rather than the standard practice of booking pre-paid orders for future equipment deliveries, GAW Miners has sold ASICs from inventory, delivered products promptly and offered responsive customer service. The company did $50,000 in sales on its first day of business, and has scaled up from there. Garza says the company is on pace for $150 million in annual sales.
Growing through acquisition
GAW Miners initially focused on mining equipment for “altcoins” such as Litecoin and Dogecoin, which use the Scrypt algorithm to process transactions, rather than the SHA-256 algorithm used by Bitcoin. But the company’s Bitcoin business is growing, as reflected in Garza’s recent purchase of the BTC.com domain name for more than $1 million. Last month GAW Miners paid $8 million to acquire a controlling interest in ZenMiner, a cryptocurrency hosting service that housed some of GAW’s hardware customers.
The deal was significant because it allowed GAW to expand its capacity for cloud hashing sales. When it launched its Hashlet product, offering a return on investment in about two months, customers quickly bought up the available capacity.
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