Dell Becomes Bitcoin Mining Data Center Provider update from October 2014

Companies often end up with more data center space than they need, sometimes following a change in strategy, sometimes after an IT refresh, and sometimes for other reasons. Dell has found a creative way to deal with excess capacity at one of its Quincy, Washington, data centers.

The company has struck a deal with a Seattle-based provider of colocation space for bitcoin mining servers who will offer space in Dell’s Quincy facility to its customers. Dell started accepting bitcoin as payment for products it sells through its website in June and will now also host some of the infrastructure that makes up the cryptocurrency mining network.

Hosting bitcoin mining rigs is a growing niche market for data center providers. Typical colocation companies, however, cannot offer the kind of deals bitcoin miners are looking for. They usually need high power densities and short-term contracts, and most of them are not willing to pay premium for reliability, which is a big part of a data center provider’s margin.

Three-year reseller deal

Bitcoin ASIC Hosting has been operating its own data center in central Washington for about three years, but that facility is fairly small and almost full. Dell’s Quincy data center has about 5 megawatts of redundant power, but the company is only using 1 megawatt, Allen Oh, co-founder and principal at Bitcoin ASIC, said.

Bitcoin ASIC has a three-year deal with Dell to act as an exclusive reseller of excess capacity in the data center, he said. This means the hosting company has 4 megawatts of capacity at its disposal.

An atypical agreement

It is an unusual deal both from a data center provider standpoint and from the bitcoin end user’s perspective. One of the biggest reasons it was attractive for Bitcoin ASIC was that Dell was willing to accept extremely short-term contracts – down to three months, Oh said – which is not something a typical colo company would make concessions for.

“Unless there’s a really large client willing to sign a year-long contract or longer, there really isn’t’ much competition out there in terms of upper-tier data centers,” he said.

Bitcoin ASIC does not focus on large “industrial” miners. Many of its customers are individuals with one or two boxes they need a place for.

It is a fully fledged data center with redundant infrastructure, which is unusual from the standpoint of bitcoin mining operations.

“It’s very attractive to a lot of people that want to have a worry-free mining operation,” Oh said. “All other data centers that are colocating bitcoin miners that are publicly selling their space are probably ‘Tier 0’ data centers.”

Still, Bitcoin ASIC was able to negotiate a price with Dell that would work favorably for the hosting company and its customers, he explained.

Another Washington site in the works

The company has not discussed the possibility of expanding the relationship beyond the Quincy facility, but it will not be the only alternative to Bitcoin ASIC’s older data center. The company is currently fitting out another 1-megawatt facility of its own in Wenatchee, Washington.

In the few years they have been in business, the four-person team has learned a thing or two about data center infrastructure. Unlike the older site, the new one will be more of a full-fledged data center, with things like raised floors, high-capacity PDUs and cold and hot aisle containment.

“We are spending two times as much on our new data center than we spent on [the older] facility,” Oh said.