The Successes and Failures of Blockchain in the Data Center

The Bitcoin boom may be behind us, but the relationship between blockchain and colocation remains in place.

Christopher Tozzi, Technology Analyst

August 6, 2020

4 Min Read
The Successes and Failures of Blockchain in the Data Center

The Bitcoin boom may be behind us, but blockchain technology continues to impact the data center colocation industry. Although many of the grandiose visions for running blockchain-related workloads in colocation centers didn’t survive the Bitcoin bust, colocation vendors continue to work closely with the blockchain community.

Here’s a look at the state of blockchain within the colocation ecosystem, and what the intersection between blockchain and colocation may look like over the long term.

Blockchain and Data Centers: What Was Promised

Circa 2017, when blockchain technology was being hyped as the solution for everything from trash collection to spacecraft management, much was promised about the potential of blockchain to disrupt, or at least improve, data centers. Blockchain could enhance data center security, we were told. It would enable better capacity planning for infrastructure. It could deliver more reliable data backup.

Like many other blockchain initiatives, these visions for the application of blockchain technology to the data center mostly didn’t pan out. They remain intriguing ideas that were never translated into technology.

That was probably due in part to an excess of ambition on the part of blockchain entrepreneurs, who may have overlooked the challenges of implementing next-generation blockchain solutions within a decades-old industry. But it was also likely the result of the general headwinds that have developed in the blockchain space over the past couple of years, as the value of cryptocurrencies plunged, security issues abounded, and large numbers of blockchain startups turned out to be scams. Had the blockchain space as a whole continued to flourish beyond the heady days of late 2017 and early 2018, when the price of Bitcoin peaked and there seemed to be no problem that blockchain could not solve, it’s easier to imagine the more ambitious blockchain-based solutions for data centers having come to fruition.

Related:Optimizing Colocation Infrastructure Strategies

Blockchain and Data Centers: The Reality

That’s not to say, however, that blockchain initiatives within the data center industry have completely failed. Within the colocation ecosystem in particular, blockchain remains alive and well, with colocation providers continuing to cater to companies that want to use colocation facilities to run blockchain workloads.

The relationship between blockchain and colocation stretches back quite a ways. As early as 2014, when Bitcoin was still on the verge of becoming known among the public at large, colocation vendors started accepting payment in Bitcoin. Some of these data center providers later suffered setbacks, when the Bitcoin shakeout came.

Related:How Colocation Providers can Gain a Competitive Advantage with Converged Infrastructure Solutions

It’s easy to understand why colocation companies were eager to cater to the blockchain community: They wanted to attract the business of individuals and companies in need of colocation space for running blockchain mining operations. Blockchain mining, which typically involves compute-intensive software hosted on specialized hardware, consumes vast amounts of electricity. The hardware also tends to be quite loud, and it exhausts a lot of heat.

All of these characteristics make blockchain mining hardware a prime candidate for placement in colocation centers, where the equipment’s owners don’t have to worry about noise and heat disruptions. They may also benefit from the lower energy costs that colocation providers can sometimes offer.

Not surprisingly, then, using colocation facilities to host blockchain hardware remains the main use case for blockchain in the data center industry. Colocation vendors like H66 and Compute North specialize in offering colocation space for blockchain mining.

The larger vendors no longer appear to be focusing on blockchain workloads as intensely as these niche providers. However, Equinix has developed a large volume of content about how blockchain may be used in the data center industry. In particular, the company has invested in portraying its Cloud Exchange Fabric (ECX), a software-defined network interconnection platform, as a critical resource for organizations that want to incorporate blockchain-based workloads into distributed or hybrid cloud architectures.

In other words, Equinix promises that its networking solution will allow companies to build a distributed network of blockchain devices or applications -- some running in colocation centers, others in the public cloud, and others on-premises -- that is not constrained by network performance or reliability issues.

For now, it’s unclear whether anyone is actually using ECX for this purpose. But it’s nonetheless easy to see how this type of offering adds to the appeal of colocation facilities for organizations that want to run blockchain applications. If you can offload your blockchain hardware to a colocation center while still enjoying a high-performance network connection between the hardware and the rest of your architecture, you have one fewer reason to deal with the hassle of running blockchain workloads on premises.


In short, the most exciting applications for blockchain technology within the data center industry have not come to pass, and they probably never will. But the link between colocation providers and the blockchain community remains strong when it comes to running blockchain miners. Meanwhile, there is a growing opportunity for colocation vendors to offer solutions for incorporating their facilities into distributed networks or hybrid clouds that host blockchain workloads.

About the Author(s)

Christopher Tozzi

Technology Analyst, Fixate.IO

Christopher Tozzi is a technology analyst with subject matter expertise in cloud computing, application development, open source software, virtualization, containers and more. He also lectures at a major university in the Albany, New York, area. His book, “For Fun and Profit: A History of the Free and Open Source Software Revolution,” was published by MIT Press.

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