Just north of Drumheller, connected to the ATCO Electric substation, are hundreds of thousands of servers working 24/7 to mine bitcoins, the cryptocurrency which made investors millions almost overnight and has promised to be the future global currency for the world.
Hut 8 Mining, which has similar facilities in Medicine Hat and Three Hills, has invited me inside their facility to see just what bitcoin mining looks like. Inside what are essentially modified sea cans -- there’s 48 of them here -- thousands of computer servers work to earn bitcoins by solving complicated mathematical problems. Every second, over 150 quadrillion (yes, quadrillion with 15 zeros) attempts are made to solve the problems.
“There’s an algorithm that’s released,” says data centre manager Dez Horwood. “Basically, we solve the algorithm as quickly as possible. By solving it we get a paid percentage of a bitcoin.”
Once solved, the solution is cross-checked by every other server in the bitcoin network to ensure the solution is correct. The solution changes every 10 seconds so essential the bitcoins are impossible to counterfeit or hack, which gives bitcoin the security which is the secret to its success. This network is different than physical currency as we know it, which is ‘centralized’ as governments have control of how much of their national currency is in circulation. Cryptocurrencies are in theory independent of government, which strengthens its security. Head of power Etienne Snyman says the beauty about bitcoin is that it’s ‘decentralized.’
“There’s no single data centre that has all the information. There’s thousands of facilities around the world that have what we call the ledger. It is a record of all prior transactions and that is stored all over the world. When the algorithm is solved, that block which is full of information gets added to.”
The whole process takes a considerable amount of power. The facility uses up to 42 megawatts of power, which is well over twice the electricity needed to power a town the size of Drumheller, Snyman says. You can feel a continual blast of heat coming off the exhaust side of the server blocks, as the processors work they produce a considerable amount of heat and staff need to make sure the blocks don’t overheat. Snyman says that’s part of the reason why Hut 8 chose to operate three facilities in Alberta. The frigid winter months provide free air conditioning, the power here is relatively cheap with the province’s abundant wind and natural gas resources, and Canada has a stable government compared to other nations around the world. The facilities can work between -40 and +40 degrees, but ideally the temperature inside the servers is around 0. They are located in the lot adjacent to the electric substation, reducing infrastructure costs and the land that needed to be disturbed to install the robust electric lines required to transfer that amount of power.
Inside the main office are dozens of screens set up to monitor the machines, their temperature, how many processes are being made by the servers, and video surveillance of inside the server boxes and the surrounding premises. About two dozen employees work around the clock in twelve-hour shifts to make sure everything is running smoothly, repairing electronics like the processor boards, CPUs, and motherboards. While photographs of inside the servers were not allowed due to the proprietary technology used, they essentially look like the motherboards you’d find in a typical desktop computer attached to fans and a power supply unit.
The bitcoin boom hit its peak in December 2017, with prices surging above $24,000 CDN for a single bitcoin. But that bubble soon burst, and the price of the cryptocurrency has continually dropped since then. In a two week span in early November, bitcoin lost about 40 per cent of its value, and is now traded at around $5,500 per coin, leading financial experts and investors wondering about the future of the cryptocurrency which was promised to change how the world does business. While investors are wondering if they will ever see a return on their investment like they did in late 2017, experts are saying that bitcoin, or other cryptocurrencies like it, are here to stay.
“I can’t imagine the world will have 180 different currencies in 100 years,” says Snyman. “So if it’s not bitcoin it’ll have to be some form of global currency at some point. There’s a lot of friction in moving money around the world in terms of changing currencies and jumping from different banks,” he says, pointing to the collapse of the Greek and Italian economies after struggling with the switch to the Euro. “Gold kind of serves that purpose now.”
The comparison of cryptocurrencies with gold makes sense. The gold rush and the crypto-mining boom both had prospectors racing to get rich quick and take advantage of new-found resources, with many calling bitcoin ‘digital gold.’
“I can kind of see that because if you look at gold, it is a metal that is used in electronics but its value is almost negligible. People attach a value to gold because it has certain attributes that they don’t really use. And often times gold
exchanged isn’t physically changing hands. Bitcoin has some of the same attributes but it is more verifiable, it’s more transparent. You don’t need an army to transfer it safely from one side of the world to the other,” Snyman says.
For now, the facility in Drumheller isn’t going anywhere, and neither is bitcoin. Hut 8 continues to mine about 20 coins a day at their facilities. Due to the nature of the bitcoin system, there is a maximum of 21 million coins available to be mined, and as of now, about 17 million have been earned. That means the race is on for the remaining coins, as companies around the world continue to step up their arsenal of code-cracking computer systems. Hut 8 recently acquired 12 new blockboxes for the Drumheller facility, upgrading their operating capacity by 20 per cent with more powerful machines. Even though bitcoin might be down, Snyman says the bitcoin business “has changed, but it’s down less than my General Electric stocks.”
