A Bitcoin Bottleneck for Data Centers?

How did we reach the point where what some would call “fake” money is vying for compute power, electricity, and plain old data center space against all our other IT needs? It’s all about the blockchain.

We’ve heard a lot lately about the pressures on data centers. The Internet of Things is ramping up. Big Data is only getting bigger. And machine learning and AI, once science fiction concepts, now have a seat in the marketing department and with your trusted TPM provider. This has led to 30% and 40% increases in capacity demand in some sectors of the data center market.

Now there is another issue—cryptocurrencies. Bitcoin and the 1,300+ of other alternative currencies on the market are taking up more and more data center resources. The trend is big enough Iceland made news for a disturbing prospect: Cryptocurrency mining may cause the nation to run out of energy.

How did we reach the point where what some would call “fake” money is vying for compute power, electricity, and plain old data center space against all our other IT needs, from cloud-based accounting applications to candy-centric mobile games? It’s all about the blockchain.

Bitcoin and its ilk exist as algorithmic definitions. In the case of Bitcoin itself, some 21 million Bitcoins will exist eventually, at which point the blockchain will be complete. All one has to do is “mine” a share, using IT hardware to solve the computational puzzle and extract a coin. The appeal of the algorithm-based currency is that coins cannot be counterfeited, and even corporations and banks are now getting into the blockchain game for secure international transactions. (If you want to know more, check out the beginner-friendly information here.)

All this computation, however, carries significant overhead, with powerful computers eating lots of energy, cooling, and rack space. Whereas Bitcoin mining used to be dominated by at-home set-ups, making a profit today tends to mean situating the equipment in a data center for efficiency’s sake. There are even cloud providers popping up to meet the independent miner’s emerging needs.

Overall, the data center market is pleased to have yet another growth driver. But there are consequences. Facility build-outs take time, so there is the possibility of scarcity and pricing impacts in the short-term as data centers race to add capacity. Plus, an already tight labor market in many areas is all the tighter with another source of competition for top data center talent.

Even as the value of an individual Bitcoin fluctuates wildly, the future of cryptocurrencies seems assured as they enter the mainstream. This will only increase the importance of applying proven solutions in the data center, such as engaging third party maintenance to extend the lifespan of existing IT assets, put “smart hands” on routine maintenance tasks and troubleshooting to spare internal staff, and save money on support to enable greater investment in facilities expansions and hardware to keep up with the cryptocurrency-driven demand for services.