Globally mining industry still remains non-transparent, quite mysterious and unexplored for majority, but the healthy functioning of the Bitcoin network through mining is crucial, vital for the protocol and for most states it has long become clear that it is not just stupid to ignore this new sector of economy, but also fraught with troubles: mining and crypto-currency are technologies not as much of today as of tomorrow and one who realizes this earlier will be at the forefront of technological progress.

In 2018, the investment platform CoinShares published a 19-page report on the mining industry research, where it analyzed variables such as geographical distribution, contents, production efficiency, electricity consumption and sources from which this energy is taken. Curious that CoinShares riped in shreds a common belief that mining causes global damage to the planet due to its extreme intensity. Indeed, by 2019, electricity consumption by miners has reached incredible levels: it is already comparable to the energy supply of such a big country as Argentina. However, the researchers came to a paradox conclusion: ultimately, the development of mining does not only cause any significant damage to the global ecology, but even contributes to its preservation.

It turned out that the rapid development of mining has been a strong push for an active research on renewable energy sources. Moreover, bitcoin mining is mainly carried out with such very sources — mostly hydropower, as well as solar, wind and geothermal energy. These types of energy use level in mining is 4 times higher than that for other energy-intensive types of production on average around the world (>77.6% vs. ~18.2%).

“We actually think that this figure is significantly higher than presented, but in the name of justified conservatism, we won’t call this number, “ the researchers note. “Contrary to what you have heard in the media, bitcoin mining is not an environmental disaster. In fact, it is one of the cleanest billion-dollar industries on the planet.”

Researchers disprove a myth about overconsumption of energy by mining: according to the figures in the report, bitcoin mining consumes less energy than an ordinary home game consoles of the last generation, working only 4 hours a day.

Geographic movements of miners on a global scale

The geographical position of the mining industry has changed significantly in recent years. If once the Mecca for mining was China, for the past few years the industry there is referred only as “undesirable activities” and is constantly on the edge of prohibition. According to National Development and Reform Commission of China (NDRC), this business “violates the requirements of existing laws, is unsafe, consumes resources, pollutes the environment and as a result hinders the development of the country’s economy.” In January 2018, Chinese miners were even officially invited to “ leave the country in an orderly manner.” Anyway, it has not yet taken place and China is still the country leading in bitcoin mining. This is mainly due to the cheap energy supplied by hydroelectric power plants in the — during rainy season there is truly a “sea” of extra energy in the country.

A paradoxical position in relation to mining suddenly has been taken by Iran: the country, which has repeatedly stated that it considers cryptocurrency a possible means to avoid the US sanctions, defacto began to strangle the mining industry, denying those general benefits for electricity enjoyed by the population of Iran and thus changing the pricing policy for miners upwards.

Fortunately, other countries do not demonstrate such a radical attitude to mining: Hong Kong, Canada, Scandinavia, Iceland and the United States compete in every way for the presence of miners in their territories, realizing that mining is the future and the sooner you join this industry, the bigger piece of the pie you will get to bite off. Russia is there too. We have long and consistently discussed the development of the industry on the highest level and some steps towards development and greater friendliness have already been taken.

Special economic zones are points of growth for a new Russian economy

Russia really has all the chances to eventually capture a significant share of the mining market, especially if there comes legal certainty in relation to the young industry. A huge number of enterprises that have a reserve of extra energy, mainly cold climate that allows to save much most time of the year on expensive cooling process — both of these factors suggest that mining in Russia, as they say, God himself has ordered.

However, some private agreements with energy companies are not enough and today there is a new opportunity to make mining truly profitable and competitive. This opportunity is coming from the opening of so-called “special economic zones”, which provide their residents with a number of significant preferences within which it is possible to deploy mining production, among other things.

Special economic zones (SEZs) are considered by the government of the country as a serious tool for economic development. These are special territories, the development of which is subsidized by the state; they began to be created in 2005 after the issuance of the law. SEZs are endowed with a special legal status, they are provided with economic benefits, which, according to the creators, should attract both domestic and foreign investors to the priority sectors of Russian economy. The main purpose of SEZs is to form several points of economic growth in Russian Federation, to establish the production of products and services that can compete with products presented in foreign markets. SEZ proved to be a working and quite successful start: today, for 13 years of their existence, they have attracted more than 750 investors from 35 countries, including such giants as Boeing, Yokohama, Rockwool, Schneider Electric, Honeywell and many others. SEZ residents have already invested more than 900 billion rubles in Russian economy and created more than 30,000 jobs.

Mining in SEZ “ Alabuga”: cheaper, bigger, faster

Today it is safe to say that mining is increasingly becoming an area of professionals. The days of mining from the balcony or in a garage are a thing of the past: now, in order to compete in this market, you need to have the latest generation equipment and be in the right place — where there is excess capacity at a lower price. The maximum and minimum tariffs for electricity in the country may differ time to time, the spread of prices around the world — up to 8-fold difference. In Russia, the regions beneficial for mining are Irkutsk, Novosibirsk, Leningrad and Chelyabinsk regions, as well as the Republic of Tatarstan, specifically the SEZ “Alabuga”.

SEZ industrial production type “Alabuga” was organized one of the first in the country in 2006 and can offer its investors a complete industrial, engineering, transport and customs infrastructure. Residents of “Alabuga” can count on significant tax and customs benefits: work with free customs, land, property and transport taxes for 10 years.

For mining enterprises, the electric power infrastructure of SEZ is important and there is something more: enterprises are provided with 350 MW of first and second reliability categories of supplied electric power with free technological connection. For comparison, the connection to the energy supply networks for Moscow is 29 million rubles, in Tatarstan — 6.25 million rubles per 1 MW. Therefore, zero connection cost for residents of “Alabuga” is truly a royal gift from the state.

Since electricity is a key resource for cryptocurrency mining, its cost ultimately determines the marginality of this business — how successful the project will be.

Takenomics with gamification, or farewell cloud mining

Today, the production site in “Alabuga” SEZ is opened by the mining startup InMining — its data center with a capacity of 10 MW promises to become one of the largest bitcoin mining enterprises in Russia. Blockbox AC computers from the leader of the mining industry Bitfury, which are equipped with a data center are one of the most powerful and least expensive solutions available in the global bitcoin mining market: Each mobile unit BlockBox AC consists of 176 servers, air-cooled, and total hashrate of 14 peta-hash per second. The use of containers allows quick installation and start-up minimizing construction and maintenance costs.

“Alabuga” is a perfect platform for conducting mining business: SEZ has its own railway terminal, through which the equipment is delivered in a short time and is subsequently located in a protected fenced area. As a resident of SEZ “Alabuga”, “Blockchain technology”, which manages the data center InMining, will be free from land, property and transport taxes for 10 years, and thanks to the free customs regime in SEZ “Alabuga” will significantly reduce the cost of foreign equipment import. But the main advantage is that 30% of the 350 MW of supplied capacity in SEZ is currently free, and such a significant amount of free capacity allows making plans for further scaling of production to compensate for the inevitable increase in complexity, so that the profitability of the project remains at the required level.

Thus, InMining can be called the mining future of Russia — this is true due to the location of the enterprise, and the innovative business model on which the startup works: model of tokenomics with elements of gamification. Previous generations of mining projects-mining hotels and cloud mining-should eventually become a thing of the past. The first offered investors to invest in physical assets — remotely purchase equipment and place it in a mining hotel, the second — to rent computing power in data centers. In both cases, the investor enters into a fixed price contract for a particular service. On the contrary to this model InMining tokenizes its assets. Tokens are backed by high-tech equipment from Bitfury and digital cryptocurrency assets, produced in the data center.

Tokenization of mining enterprise is a great way for an investor to diversify assets, invest in a promising industry with minimal effort and at the same time maintain the ability to quickly enter and exit the market at the moment when he considers it necessary. The whole process, from the purchase of equipment and its installation to service maintenance, is essentially delegated to the mining company — it remains only to monitor the market situation and receive dividends.

In the mining industry of Russia there are still many spots — we need to clear the law, large cooperation of fellow-minded enterprises, we need investments and common expansion of mining development understanding importance as one of the branches for the new economy. However, we must admit that the first important step towards these processes have already been taken, and this is incredible, because mining and blockchain technology are industries that may well bring Russia to qualitatively new levels of economic development.