Cloud Hashing CEO on Hardware, Network Growth and the Threat of Pools

Daniel Cawrey
Apr 2, 2014 at 12:01 UTC
Updated Apr 3, 2014 at 17:31 UTC

Cloud computing and crytpocurrency mining may have seemed like an odd combination back in the days of GPU, and later FPGA, bitcoin mining. The rise of ASICs for SHA-256 transaction processing on the Bitcoin network, however, meant that something had to give.

That’s where Cloud Hashing comes in: the company charges a per-gigahash contract fee that allows users to harness the company’s own mining equipment. It’s bitcoin mining in the cloud.

Given the fact that mining equipment is loud and noisy, Cloud Hashing could easily be compared to any other type of ‘heavy lifting’ computational process that has been moved into the cloud.

Servers, storage and miners

People generally don’t keep servers or storage area networks in a household; hence the rise of the cloud. The ‘regular’ cloud is powered by massive data centres run by the Googles and the Amazons of this world with very specialized hardware.

Cloud Hashing is a unique cloud-computing company with respect to hardware, however. Because the mining hardware industry is moving so fast, the company quickly realized that buying and using off-the-shelf bitcoin mining gear is much easier than building its own infrastructure with its own boards housing ASICs (application-specific integrated circuits):

Emmanuel Abiodun, Cloud Hashing’s CEO told CoinDesk:

“We buy from every hardware company. We buy from Cointerra, Butterfly Labs, etc. We have orders in from pretty much everybody. We’re manufacturer agnostic.”

“The reason for doing this is economic pressures that the hardware manufacturers are facing. It doesn’t make sense, at least not today from Cloud Hashing’s perspective, to build custom equipment with ASIC chips,” he explained.

Abiodun said that this situation won’t change anytime soon, unless there is interest by huge technology players like Oracle to build out enterprise-level ASIC mines in data centres:

“The speed with which the market is moving means that it is easy to consistently upgrade with the use of hardware vendors.”

Hardware risks

Cloud Hashing is taking on risk by doing this, however. Because hardware manufacturers struggle to ship new and more powerful mining products in expected timeframes, the company essentially takes that uncertainty upon itself.

That’s just another reason why paying for mining in the cloud might be a safer bet than dealing with the stress of mining hardware companies slipping on their shipment dates.

In the past six months the Bitcoin network has gone from 1PH/s to upwards of 45PH/s. Source: Blockchain.infoIn the past six months, the Bitcoin network has gone from 1PH/s to upwards of 45PH/s. Source: Blockchain.info

Sure, cloud mining means less control, but there’s zero chance of losing time mining with gear that is on a delay, and that will eventually only be worth scrap metal value.

Cloud Hashing knows that it will get the miners it orders at some point, and is also already hashing away so it doesn’t have to worry so much about losing money from not delayed equipment.

Furthermore, the company already has plans to double its amount of mining power. Said Abiodun:

“Today, we’re about 3PH/s. We want to be close to six by the end of the year.”

Network growth slowing

Cloud Hashing has seen a decline in the Bitcoin network’s growth – a tapering off of network power. “Growth used to be 4% per day, now we are under 1.5% per day,” Abiodun said.

He explained that the likely culprit is the physical limitations that exist in terms of producing ASIC miners:

“It’s basic economics. You can’t just keep doubling things. You can’t expect CoinTerra or Butterfly Labs to double their workforce every month.”

Manufacturers are expanding production, but there are limitations to fabricating the chips, building a product and shipping it out.

In other industries, companies get years to develop. In bitcoin mining, products go from the design stage to the market in mere months.

“It’s all supply-chain management, which a lot of these companies are learning. We’re not at the level of Intel or AMD, who churn out thousands of these [chips] a day,” said Abiodun.

Cloud Hashing’s advantage

Cloudhashing exists in a crowded market. There are various options for cloud mining: hosted mining, virtual hosted mining and other cloud competitors.

One of the things that allows Cloud Hashing to stand out is that its scale means has its own pool for customers.

Said Abiodun:

“We operate our own pool. We use our own management software. We don’t use a third party [for that]. It’s too much money to be trusting someone else with.”

He told CoinDesk that the entire pool is able to run using just one two- or three-core server.

Top 10 pools as of mid-March. Source: Organ of CortiTop 10 pools as of mid-March. Source: Organ of Corti

Abiodun explained that the pool operation really just works like a router, in a bitcoin sense:

“What a pool server does is it connects with the bitcoin network. And it reads the transactions that are processed through the miners.”

Open to all

Cloud Hashing has a unique approach. It’s owns a large network of mining machines, and it allows any paying customer access. Many of the larger miners and pool operators often prefer to work in more secluded, secret ways.

The company’s strategy is different. “We’re very open. We’re trying to offer mining to everybody,” Abiodun said.

Cloudhashing sells its services as a yearly contract. Source: CloudhashingCloudhashing sells its services as a yearly contract. Source: Cloudhashing

Furthermore, mining hardware continues to evolve: chips are getting smaller, and there are hardware improvements to be had, according to Abiodun:

“There’s stuff to do on the hardware side, like reducing latency. And not just with the chips, but with the boards that communicate with the chips.”

Pool worries

As chips become smaller and hardware gets faster, there’s been a growth in ever-larger mining operations.

One concern has been that larger mining operations could ultimately end up with an unfair amount of control over the network as a whole.

“That’s something that a lot of people talk about and worry about. We’re seeing the emergence of large miners like ourselves,” said Abiodun.

Abiodun believes, though, that having 10 large pools as opposed to five large pools is better for the network as a whole.

Pools in order of most blocks solved. Source: Organ of CortiPools in order of most blocks solved. Source: Organ of Corti

There’s room enough for everyone, Abiodun said, and a plethora of large pools each having a share is a good thing:

“I do believe that we are more diversified than we were before. More larger pools are better for everybody.”

Rumour-mongering is all a part of the bitcoin mining industry, he explains:

“I’ve heard everything: I’ve heard that the network would be 200 petahashes by now.”

But it isn’t – the network has only reached 45 PH/s so far. So it’s wise not to believe all of the chatter and noise.

That’s why Cloud Hashing simplifies things down to mining-as-a-service, so people don’t have to worry about the day-to-day operations of bitcoin mining, added Abiodun.

Disclaimer: This article should not be viewed as an endorsement of any of the companies mentioned. Please do your own extensive research before considering investing any funds in these products.