Bitcoin, a gold mine of cryptocurrencies in the industrial desert of Bulgaria
In Kremikovtzi, Bulgaria, about a half an hour of car drive from Sofia, snow lies on the ground: it is the first snow in December and the temperature is about zero. A dozen of buses, left at every corner, are covered with snow. Those buses took workers to metalworking plants in the early 90s of the past century. In the era of communism at least 20 thousand of workers were brought from residential districts, where they lived, to the industrial zone. But today abandonment reigns here, only pipes and factories outline through the fog. Cyrillic signs and inscriptions have faded out, cabs have troubles getting here, and big watchdogs are prowling about in this shadowy place. The industry once was very active here and the money was made, but then, how the locals call it, “capitalist production” made the metalworking unprofitable. “There no metal in Bulgaria”, they explain. “And import is very expensive.” Factories closed one after another and left behind nothing but uneasy silence. But nevertheless, here between these leftovers of industry, “money is being made”, “coins are being minted”. And even better: crypto coins. All of a sudden, a gold mine was opened: the European “bitcoin factories” are situated here, the place of birth of virtual coin, which has already for several months become a talk of people, wondering where it comes from. Who’s behind it? How is it created? Is there a real “bitcoin factory”? Yes, there is. More than that: there are many.
This is how money is made at the abandoned factory
We meet Gianluca Mazza and Alekos Filini at one of the streets of Sofia. They are visiting their Bulgarian partner. They use a smartphone app to call a cab. “Cab drivers are bad at English”, explains Gianluca. “And our destination is difficult to describe”. The scenery changes as we are getting far from the city. Suburban high-risers, snow-covered fields, shacks, rusted railway tracks with as rusted carriages. When lines of first factory buildings appear, we understand that we arrived at the abandoned area.
Signs and inscriptions have faded, nobody around, and we met only one car on our way. We stop at the site in front of the blue colored building. Blue facade, a panel with the old inscriptions, a cabin with the gatekeeper and two large dogs, which both bark and cuddle up. On the upper floor, there is an inscription “0301”, a name for the farm-factory of these two Italians, who mint cryptocurrencies in Bulgaria. It’s freezing cold outside and it’s very cold in the building. We make our way to the fourth floor: peeling walls, office premises in damaged condition but in the middle of repairing. Access to industrial premises through a green gate: step in and we are overwhelmed by the deafening boom. The strongest monotonous drone, growing louder with every step. “These are fan blades”, they explain to us. A complex ventilation system keeps the low temperatures. This is necessary despite the freezing cold of Sofia. When Alekos tried to turn off the cooling system, the premises turn into a sauna in several minutes. “It all because the machines”, he explains. “Their functioning produces the heat.” Opened windows were not enough, ventilation fans must be turned on as soon as possible: the equipment works only in the cool surroundings, otherwise, it will stop and break down.
Racks full of accumulating rewards
We are at the crypto-coin factory: rows of racks full of video cards, working day and night on “mining”, in other words minting bitcoins and altcoins. We are talking about the components used for video games: the complexity of work requires many resources. Every machine includes six video cards and each of them fulfills a computer program, aimed at the getting the “reward”. “The machines”, Gianluca tries to explain, “spun the algorithm. Their functioning and consumed energy are paid with cryptocurrency coming to our electronic wallet”. After that, they introduce them to the market by selling them. Currently, Gianluca and Alekos are dealing with mining of alternative crypto coins, from Ethereum to Zcash and then convert them to bitcoin.
Getting around the monopoly of China
The monopoly on the equipment for bitcoin producing is, in fact, Chinese and it belongs to Bitmain. “Once in a while”, Gianluca tells, “this company throws a thousand of machines to the online market. It opens a real hunt because everybody knows that during next several months they will not be sold”.
So, in Bulgaria, there are some people that buy them at a price of 5 thousand levs (about €2500) and sell them for twice the price. To avoid this problem and fraud, crypto coin miners use video cards. One video card costs €600, and the price rises according to its power. Investment in 0301 farm counts to €600,000 (received from 13 investors, including foreign). “In January”, Gianluca says, “the number of machines will double, and we expect to return on investment at the end of the year”. They paid off almost the half of the machines price in three months.
Farm business and cheap power
Ivan Kamburov is a Bulgarian. He is the owner of Mint company and the infrastructure provider. He shows me a picture on his phone: “Can you believe that we are talking about a factory?”. In the picture, there is an abandoned and decaying structure: half-ruined with logs sticking out in different directions and broken windows, trash, and industrial waste. “Here will be the next factory!”, he exclaims excitedly. It was he who provided Gianluca and Alekos with the premises for machines installation. I’m the owner of the rented properties”, he describes himself. “A landowner.” Bitcoin mining in Bulgaria is a profitable business: the energy costs are three times lower than in Italy or the other part of the geographical region that is called “Western Europe”. “The most challenging part of this business”, he explains in English, is the electric energy. That’s why we are situated in this part of the city: two office spaces consume energy equal to a medium-sized factory, and the energy consumed by one machine is equal to the steam heating of a house through the whole winter. Five machines consume as much energy as an ordinary family. Energy consumption in only one hall is 300 kilowatt per hour: industrial zone guarantees a stable power supply. Ivan is paid a rent for the factory. “We build infrastructure, find these premises and repair them. Install a ventilation system and recover the power grid. We think of ourselves as data collection and processing center”. However, Ivan and his partners run business in other spheres as well. As, for example, “Amanda” (a result of cooperation between Italian team of 0301 and Bulgarian company Mint). “The target audience are investors, that want to participate in cryptocurrencies mining only through investments. We buy machines, launch them and distribute dividends at the end of the year”.
He tells about himself that he always has been working in the IT-sphere: first bitcoin mining machines he assembled in his garage about five years ago. Then he went to infrastructure business. He realized that the country where he lived, had a competitive advantage that would allow it to become a leader of this sphere in Europe. It is not only low energy costs, it is also cheaper labor force, taxes at 10%, and the living cost that is almost two times cheaper compared to Italy. “Except for the rest, these last months seen the real boom, many started to speculate on bitcoin. This is an income-generating period for us and it is not really important that all this will calm down in a couple of years: by that time we will already create a network of contacts and credibility in whole Europe. And this will become a base for development of innovative technologies and new areas of its implementation, starting from blockchain”.
This area is still unknown and not captured by web monopolists. “Maybe Bitcoin will become a thing of the past, but this technology will remain and we want to stay with it”. Mint investment counted to €100,000, and in 15 months it grew four times. On their website (where it is possible to rent a machine for mining) they offer hundreds of installations: this business differs from the business of Gianluca and Alekos, who on the contrary, have long-term plans and bet on the crypto coins accumulation, in order to place them on the market at the appropriate moment. “Obviously there are hundreds of farms in China”, - Ivan explains. “It is hard for Europeans to operate there: they do not only produce the equipment for mining, they also have farms themselves. The danger is that they may control everything. And we are the European alternative”. Along with Island, where the energy is cheap, “but labor force is expensive”, Ivan sums up. “And besides that… there is a risk of a volcanic eruption!”, - he laughs and says goodbye. “I got to go and find more abandoned factories”.