System Builder Maingear Sees Big Opportunity With Cryptocurrency Mining Rigs

As the CEO of a company that builds and sells high-performance gaming PCs to consumers, Wallace Santos found himself in a tricky position when he decided his company, Maingear, would start selling a custom built system for mining cryptocurrency- referred to as mining rigs- later this year.

The problem? The rise of cryptocurrency has sometimes come at a literal cost for gamers, Maingear's core constituency, who have had to deal with rising prices and a sparse supply of graphics cards since powerful GPUs made by companies like Nvidia and AMD have been optimal for mining cryptocurrencies. But to Santos, moving into the cryptocurrency space was not about irking gamers, but ensuring the long-term success of his business.

"We either innovate and adapt, or die," Santos told CRN.

As cryptocurrencies like Bitcoin experience massive price swings and regulators move in, system builders and distributors are figuring out where they stand in the space, if at all. Mining is a process central to cryptocurrency, where powerful computers are used to node transactions on a public ledger called the blockchain. The process is incentivized by rewarding digital currency to miners that solve cryptographic puzzles to log transactions.

While Maingear plans to dive into the cryptocurrency mining rig business later this year with a custom-built hardware and software solution, Velocity Micro, another system builder based in Richmond, Va., has already been building and selling custom cryptocurrency mining rigs to researchers, universities and other groups, though not on a larger scale for individuals and organizers that run so-called "mining farms."

Velocity Micro CEO Randy Copeland told CRN that he has doubts as to whether cryptocurrency mining, which has high energy requirements, can be a sustainable business in the United States and other countries that have high energy costs. But he thinks that blockchain, the decentralized ledger technology that powers cryptocurrencies, will have a brighter future with customers and hardware vendors for high-security data transfer applications.

Kent Tibbils, vice president of marketing of Fremont, Calif.-based distributor ASI Corp., told CRN that while ASI doesn't sell any cryptocurrency mining rigs, the company has seen an uptick in system builders buying parts, mostly GPUs, to build their own."We've seen those grow 30 percent last year and 30 percent this year projected," he said.

For Santos, part of the reason why he's so bullish on cryptocurrency is because of new developments that are making mining more efficient and potentially more profitable. That includes a recently revealed patent application from Intel for a Bitcoin mining hardware accelerator that would require less energy.

"Having companies like Intel file these patents further validates what we're doing," he said.

While Maingear is several months out from releasing the mining rig, Santos said the early announcement was meant to serve as a message to Intel, AMD and Nvidia, three of his vendors: we are serious about this space, so we hope you are too, because we would like your help.

"We wanted to get companies like AMD, Intel and Nvidia to acknowledge this," Santos said.

Intel, AMD and Nvidia have shown varying degrees of interest in the space, with the latter two companies finding a niche market for their GPUs with cryptocurrency mining rigs. However, one Wall Street analyst recently cautioned that AMD and Nvidia face impending competition from Bitmain, a five-year-old company based in Beijing, China, that is developing application-specific integrated circuits, which are more efficient than GPUs at mining the popular cryptocurrency Ethereum.

Intel hasn't benefited nearly as much from the cryptocurrency mining gold rush, in part because the company currently doesn't sell discrete GPUs like AMD and Nvidia does. However, the recent patent filing from Intel indicates that the company is potentially developing a hardware accelerator for Bitcoin mining that would couple with a processor core and lower energy consumption.

Michael Reed, director of Intel's Blockchain Program office, told CRN earlier this month that he was unable to discuss any unannounced projects but said Intel has a general interest in enterprise applications for blockchain, which can be used for things beyond currency transactions.

"This is a new capability that can take the middleman out of the transaction and ultimately create more value for companies. Intel's interest in this space is in identifying a new workload that comes into play and helping to make sure that workload runs best on Intel architecture," he said. "So as companies adopt our latest processors, either in servers or in [client computers] or in the cloud, they can run these new technologies, this new blockchain technology."

With Maingear's announcement of a cryptocurrency mining rig, Santos said he's hoping more companies will develop mining-specific solutions. He said the company is already working with certain vendors to bring the rig to market.

While there is a market for large mining operations, Santos said he is aiming for hobbyists who are interested in experimenting in the space. The CEO couldn't elaborate on the mining rigs' features but said it will be a custom hardware and software solution.

There may be questions about the sustainability of cryptocurrency mining now, in part because of the high-energy costs but also because of the changing regulatory environment. But Santos said he believes those issues will be addressed by new innovations and clearer regulations.

"I think over time once it's regulated, people will feel safe about getting into the space," he said.

The bottom line for Santos, however, is that cryptocurrency is here to stay: "If we don’t do it, all I'm doing is leaving money on the table for every startup to do it."