MegaBigPower’s Franchisee Program Could Reshape Bitcoin Network

Stan Higgins
Jun 30, 2014 at 21:00 UTC
Updated Jul 1, 2014 at 13:45 UTC

Industrial bitcoin mining company MegaBigPower has announced that it is starting a franchise program that could reshape the bitcoin mining network and create new pathways for industrial mines to form.

The program enables individuals or companies that want to start a mine to step around a critical roadblock: mining hardware startup costs. MegaBigPower aims to provide mine operators with the know-how to begin hashing quickly, accomplishing this by providing pre-configured hardware at no upfront cost to vetted candidates who are capable of providing facilities and power.

Washington-based MegaBigPower (MBP) is North America’s largest mining operation. The mine, which generates millions of dollars worth of bitcoin per month, began developing its franchisee network earlier this year. Now, the company is planning a broad expansion effort that could add as much as 50 PH/s in mining power per month to the network.

MBP owner Dave Carlson told CoinDesk the time is right for this kind of program because of a mining hardware glut that he sees coming ahead. This presents an opportunity to establish a broad network of decentralized mine operators under the MBP umbrella.

Carlson told CoinDesk:

“I perceive that there is going to be a large surplus of manufactured hash power. With so many teams and companies rushing into the space, they’re manufacturing more hash power than individuals can put up by building mines. What I think is going to come of that is that the new commodity won’t be access to mining equipment. It’s access to power.”

Creating a global franchisee network

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Carlson explained that providing pre-configured hardware at no upfront cost incentivizes mining participation, removing a hurdle that oftentimes keeps more investment away from industrial-sized operations. It also makes the process significantly cheaper for mines to get started simply because the startup expenses are significantly lower.

He said:

“By giving them the hardware upfront they have a lot lower capital costs to get started.”

One of the key elements of the franchisee program is the ability for participating mines to begin hashing before paying their first fees. Carlson explained that this enables them to focus more on generating bitcoins and ramping up their hashing power rather than immediately worrying about paying back on the investment.

“What we want to do is build a large network presence, and if we do it through this franchise network, we’ll do it faster and easier than if we were to build this power ourselves.”

He went on to predict that, if successful, the program could constitute hundreds of megawatts worth of hashing power from around the world. Carlson added that the average franchisee will host between one and five megawatts in electrical capacity.

Carlson also noted that the program works well from an investment standpoint as well. He argued that investing in industrial space with sufficient power-generation capabilities is less of a risk without the hardware costs involved. Once you involve expensive hardware, he said, there’s a possibility that a mine could turn out to be unprofitable.

Hands-on approach

Franchisees will form a broad, interconnected network that has MBP’s central facility at its heart. The company will oversee franchisee miner performance, as each one will be mining in pools specially built for the franchisee.

In regards to actually selecting mines to join the program, Carlson explained that members will be vetted in the simplest way possible: on-site visits by himself or another representative from MBP. The purpose, Carlson said, is to make sure that a prospective mine is actually capable of delivering sufficient energy output – and bitcoins.

Carlson said:

“I actually travel out to the proposed facility and put my eyes on it, to confirm that the power is in place, that the cooling is in place most importantly, and that the potential franchisee has the resources to bring a team and get started.”

From there, he said, franchisees begin the ramp-up process that emphasizes stable – and upward – growth. Carlson said that initial onboarding may start a mine at around 100 terrahashes per second, in order to both test their deployment capabilities and make sure that a new franchisee isn’t overwhelmed by a huge increase in mining power.

The purpose of staying involved through performance oversight and site visits, Carlson said, is to make sure that those brought into the franchise network are capable of profitability. By monitoring pool performance, MBP can see which members aren’t performing as well as they should in order to intervene and correct any issues.

Building an anchor franchise

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MBP has already begun building a network of industrial mines under its umbrella, most notably with California-based anchor franchisee Aquifer. Carlson described them as a “strategic partner”, with Aquifer serving as both a testing ground and foundation for future investment from MBP. The company also plans to embark on a 50MW power build with Aquifer over the next six months.

Carlson said:

“It’s as creative as we want to get it.”

He added that, in the future, MBP may use Aquifer’s facility to host hardware for its own mine as well as the franchisee itself. As well, the utilization of the facility and its resources may evolve over time depending on the strategic needs of the company and the franchisee as a whole, with Carlson saying, “that one’s pretty flexible”.

East Coast franchise takes shape

New York-based CoinMiner, led by CEO Hayden Gill, originally began as a Scrypt mining operation prior to becoming involved with MBP. A discussion about the franchisee model in April at the Inside Bitcoins conference in New York with Carlson led Gill and his team to build a relationship that ultimately resulted in CoinMiner coming under the MBP umbrella.

Gill told CoinDesk that the startup process took only a few weeks before CoinMiner received its first 50 TH/s of mining power. The mine received a second shipment of mining racks just last week, and as Gill explained, the future is “growth, growth, growth”.

Gill said:

“I’d like to see us up in the 10 megawatt range sometime by mid-next year.”

Notably, CoinMiner is aiming to support its own business model by tapping into alternative energy sources in The Finger Lakes region in New York, where the mine is based. He cited hydropower and methane power as two possible sources, adding that these efforts, combined with local subsidies for new businesses, are giving them a boost as they ramp up.

According to Carlson, the participation of Aquifer and CoinMiner will be cruical for the development of the global franchisee network, telling CoinDesk:

“Both of the early adopter mining franchisees are good testing grounds for new concepts. We’re trying different scenarios with these guys, and they’ve been very helpful and feeding back information to us.”

Images via MegaBigPower