Blockchain companies struggle to grow in Cleveland because of infrastructure problems

Posted at 11:00 AM, Dec 03, 2018
and last updated 2018-12-03 11:00:52-05

In a large warehouse in Valley City, Ohio, roughly 2,500 blockchain "miners" toil away making so much noise two people have to shout to be heard.

They belong to LightSpeed Hosting C.E.O. Joshua Holmes and he says there could be so many more.

A view of LightSpeed Hosting's Valley City facility from above. Holmes says there are roughly 2,500 miners sitting on the racks.

"As it stands right now, we can only use one-third of the full capacity of this facility," said Holmes.

Holmes says he's had to pass up a lot of work just because there simply isn't enough power for his machines, which run constantly.

Blockland Cleveland runs from Dec. 1-4 in the Huntington Convention Center of Cleveland, which was donated by Cuyahoga County for the event.

Blockchain is supposed to be a more secure way to track data by storing information on so many servers at once that it's nearly impossible to hack. Miners store that information while also running complicated mathematical equations trying to uncover new "blocks."

Fans in the room and on each machine try to keep the miners from overheating while they work around the clock, every day.

"The miners are actually running the network," said Holmes.

They also draw a lot of power.

"The typical miner, if you take two of them, they equal the entire electricity supply for your whole house usually," said Holmes.

He says the 2,500 miners he has can use as much power as some cities use. Unlike cities, the miners run 24 hours a day, seven days a week, so there is no spike and fall in power consumption.

"There's some substantial fraction of all the power in China, I believe, going into Bitcoin mining at this point, so it's not surprising that we can break the grid here in Cleveland with some mining operations," said Case Western Reserve University Executive Director for the Institute for Smart, Secure and Connected Systems Nick Barendt.

Holmes says his miners have overloaded the local power grid three times in the last few months, forcing the company to do only one-third the work of what they could be doing.

He says that's why infrastructure upgrades are one of the first things that need to happen if Cleveland is going to become a Blockchain hub. It's something organizers at the Blockland Conference are hoping for, but don't expect it to happen soon.

"It's billions of dollars of investment over the last 150 years, so we can't change it overnight," said Barendt.

FirstEnergy responded with the following statement:

As you probably know, blockchain is basically a digital database hosted by millions of computers simultaneously that can be shared, accessed and updated by anyone on the internet.  The concept was originally developed to support cryptocurrency but can be applied for virtually any economic transaction or financial information sharing.       

Blockchain and cryptocurrency mining often utilize massive computer servers that draw lots of power for processing and cooling.  We have yet to see much development of this business in Northeast Ohio but have spoken with a few potential ventures.  Based on the large power requirement estimates these businesses have presented, additional electrical infrastructure development could be required to support their facilities, depending on where they locate them. 

FirstEnergy encourages anyone interested in starting this type of business to work with our team early in the planning process so we can help them find the best site for their facility requiring the least amount of additional investment.  This is the same process our economic development team utilizes for other industrial customers with significant power demands looking to locate to the area.   Our goal is to help them launch their business efficiently and quickly while providing reliable electricity.

Because blockchain and cryptocurrency have not really taken off in our service area, I really don’t have anything additional to lend to the story.  And since FirstEnergy is focused on delivery of electricity through our utilities rather than the generation of it, I don’t have any information on what implications growth of these businesses might have on the price or availability of power in the region.  Hope this is helpful!
- FirstEnergy Energy Delivery and State Communications Supervisor Jennifer Young