Data Center Colocation for Cryptocurrency Mining

Cryptocurrency and the crypto mining trend has seen a rise, fall, and rise again since the inception. With currencies like Bitcoin, Ethereum, Bitcoin Lyte, and Ripple for example skyrocketing, plummeting, and leveling back out, there has been an increase in demand for crypto mining data centers within North America. While crypto mining originally started as a homegrown operation, it has been steadily evolving into larger operations and may scale up on par with data center levels.

As the crypto currency mining trend has become increasingly more main stream, this trend has expanded into data centers via colocation opportunities. While this may be a popular trend, be sure to review and assess whether it’s the right choice for you.

What is a Colocation Data Center?

The term colocation is often synonymous with data centers. This essentially means that there are multiple servers and various other equipment owned by different companies all stored in one data center.

Why Data Center COLOCATION?

Simply put, data centers are a quick and robust way for crypto miners to get online and become operational as faster as possible. Data center colocation facilities can fulfill power, space, and cooling requirements in order to be completely operational. Cryptocurrency mining in general requires a large amount of electricity, but does not require the same levels of redundancy as a regular data center.

Additional benefits of data center colocation can be:

Reduced Costs: When it comes to owning and operating your own data center facility versus paying the costs of a colocation, the overall costs will be far lower in comparison. Depending on your contract set forth with the data center, it can also ensure that you’re paying a flat rate and you’re able to easily anticipate any costs associated with your crypto mining operation.

Reduced Overhead: When operating via a colocation facility, less staff will be required to conduct regular operations. There is also the possibility of setting up a contract that has the colocation facility’s own on-site staff of technicians to handle general maintenance, including parts or components.

Redundancy: Data centers are generally built with redundancy in mind. Data centers play a vital role in many business operations, including data transmission, file or record keeping, and communications. Data centers are designed to keep your servers up to prevent any losses of corruption of data via backup power sources such as backup generators. When it comes to cryptocurrency mining, redundant data center colocations can ensure that your equipment is constantly up and running to keep operations running smoothly.

Challenges of Data Center Colocation

Before heading off and looking into data center colocation sites to start your cryptocurrency mining operations, be mindful of these challenges that may determine your ultimate site selection decision. While data centers are a seemingly robust solution right out of the box, there are important factors to consider that may result in looking for a better site or method to successfully operate your cryptocurrency mining operations.

The greatest challenge for looking into data centers colocation for cryptocurrency mining is power. Power is one of the single greatest challenges in effectively operating a data center colocation for crypto miners. Crypto mining operators generally need cheap power rates per kilowatt hour and even cheaper rates when running operating at full load. Data centers that rely on backup generators during times of power loss due to power outage often rely on backup generators to maintain operation of servers, cooling, and other key systems. This cost can then possibly be passed on to you and included in your contract.

Local climate also plays an important role when selecting a data center or site for cryptocurrency mining operations. Crypto mining machines generate large amounts of heat and require adequate cooling to continue running efficiently. This requires a large amount of power to maintain the cooling systems. In areas that experience cold seasons, crypto mining operators can leverage the colder weather as an additional means of heat dissipation, depending on how the data center operates.

While data centers are known to be built with redundancy in mind, there are actually different tier levels of data centers that are determined by need. For example, tier 1 data centers have no redundancy, whereas a tier 4 data center will have complete redundancy. Depending on the data center, tier can greatly affect cost. There is a huge difference in cost between a tier 1 data center and a tier 4 data center. Even tier 2 or tier 3 data centers can have an average cost difference of $650 per square foot. This is due to the amount of redundancy set in place for each data center tier and costs associated with building & maintaining that redundancy. When considering a data center colocation, be sure to keep this in mind before making your decision.

More information on data center tiers can be found here: Backup Generators for Data Centers

As explained in an earlier point, cryptocurrency mining requires large amounts of power and data centers are no different. A majority of data centers rely on large commercial generators to backup the facility and all the servers when experiencing power loss due to power outage.

When dealing with a colocation data center, if the facility is relying on these backup generators on-site, then you may be paying the premium for this redundancy. This is due to the fact that backup generators are mainly used to keep the servers, cooling systems, and other key systems running 24 hours a day, 365 days a year. Backup generators that are big enough to meet power requirements for data centers are often costly to acquire, install, and regularly maintain. This cost may then be handed down to you in part.

If you can afford to be offline or out of operation for 24 – 36 hours a year, then the cost of a certain data center’s redundancy measures may not be the right fit for your needs and could possibly even be considered an unnecessary expense.


While backup generators are vital for data centers, it may not be the right fit for your crypto mining needs and colocation may be out of the question. Data centers that revolve around redundancy and employ backup generators to help maintain redundancy can greatly affect your cost and ultimately your bottom-line. Be sure to assess the pros and cons and see if the cost vs benefits are right for you.

If you’re a data center operator looking to ensure redundancy with backup generators or looking to backup your data center facility for greater redundancy to open the channel for colocation opportunities for cryptocurrency miners, please reach out to us at Woodstock Power Company!

Give us a call or send us an email: 610-658-3242 or

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