Every month, LowEndBox puts a question in front of hosting industry leaders and LEB community providers, who are invited to comment and offer their perspective. Our goal is to stimulate discussion around important issues in the industry, inform our readership, and help other providers so the community as a whole benefits. If you have a question you’d like to put to the round table, please submit it to us!
This month’s question:
What effect has the Chia Crypto-driven hard drive shortage had on your business? If you sell dedicated servers, do you have concerns that users are going to burn out gear? Have you experienced difficulties replacing gear due to price increases? Or has the Chia phenomenon been a boon to sales?
Stacey Talieres, Director of Marketing, InterServer
Just in time for the chia mining craze we released two new product lines. Storage hosting and storage vps. Miners especially took advantage of these two services. We had promotional pricing in place and did not expect such a huge influx of orders. During the Chia mining period, we received a high influx of sales. Customers started requesting custom dedicated serverquotes for large storage servers with many Terrabytes of data. As the orders came in, our provisioning department started noticing price increases on the large capacity drives that were being ordered. This also caused a lot of delay issues from various vendors, especially during COVID with shipping delays. In turn, we were forced to increase the price of our drives across all orders and advised customers of the potential setup delays. The sales boost was unexpected but welcomed. After the first couple of orders, we started receiving complaints about drive failures, and requests for drive replacements. When it was time to renew the orders, we noticed most, if not all, of the Chia mining orders, were canceled or not paid for. Most customers ordered the servers for one-time use, and we were left with an unexpected amount of canceled (and faulty) inventory. This has been an ongoing pattern that has been identified during each trend of the major mining hypes starting with CPU, GPU, & most recently Chia.
VirMach has been acquiring hardware at a rapid rate as we move toward colocation with Ryzen CPUs & NVMe SSDs as well as expanding HDD storage nodes to more locations, so we have been monitoring nearly all hardware prices very closely.
Out of everything that has transpired since lockdowns began, I feel like the Chia situation has been widely exaggerated and it is most likely dead-last in terms of significant industry impact (including all other storage-based cryptocurrencies.) At most, it resulted in a very temporary spike in price or a slight delay in obtaining a specific hard drive model and capacity. In fact, a big part of this may have been people panic-buying hard drives as sensationalized news articles spread. It looks like as of today, prices have already returned to normal levels in most markets.
In reality it just meant some minor inconvenience in acquiring hard drives with a slight price impact and maybe having to consider other models.
In terms of impact on hardware durability, Chia will wreak havoc on the solid state drives utilized to initially “plot” or otherwise perform the initial extensive disk operations, and will leave hard drives relatively unscathed. As for difficulties in replacing gear and concern in price increases, we are more worried about the blatant decrease in quality of other components, such as lower quality controllers and NAND in NVMe SSDs, combined with price hikes instead of the usual reductions. Even RAM ends up being affected since reputable companies have shifted their focus to more profitable market segments and essentially discontinued some production.
Perhaps if Chia has any lasting impact, it will be in the form of adding fuel to the fire in SSD pricing as some are damaged more quickly and ultimately taken out of the supply pool but that’s more or less baked into the overall impact of the less durable hardware previously mentioned.
The entire concept relies on “proof of space and time” which means a lot of space, and a lot of time, two things that will result in an expensive bill to the customer attempting to earn this type of cryptocurrency. Last I checked, a customer would have to rent at least about 20TB HDD and a 2TB NVMe for an entire year at about $2/TB/month to break even.
We would welcome anyone purchasing our cloud storage services for Chia farming as long as they understand how it all works, which means they would most likely have to contact our sales team to add a dedicated NVMe SSD for plotting.
Dustin Cisneros, CEO of RackNerd
In business, there will always be waves, some of which (depending on your awareness) may or may not affect you. We saw this one coming, and ahead of time we stocked up on inventory which allowed us to continue servicing our existing and new customers with ease.
I covered the importance previously within our blog the importance of staying in communication with your customers and vendors.
Our vendors have assisted with our growth – both in supply and providing us with trends so we can gauge the market and capture supply accordingly. We have expanded faster than ever, thanks to our amazing customers, vendors, partners and team. We’ve expanded our office space since then, added additional locations, and deployed additional product lines to better serve our customers. We’re all about expansion – and providing value that our customers can appreciate and grow with.
In terms of Chia burning out gear, that’s a valid concern that we believe all providers should have to consider. What a great question.
We certainly considered the risk and value our components, and investment. We utilize enterprise infrastructure by standard and care for its longevity, so we found ourselves being selective over whom we’ve onboarded, as we didn’t want to take on short term business that would ultimately damage our gear. At the same time, it’s important to say that for deals that made sense, which essentially covered the hardware cost and more, we were able to do it. We’re always open to discussions and try to be as flexible as possible to accommodate our customers. We often do, and will, work out customized deals with customers on a case by case basis, whether that be a custom dedicated server requirement, lease to own opportunities, or hybrid colocation requirements.
Thank you to all of our providers for participating this month!
If you have a question you’d like to put to the round table, please submit it to us!
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I also enjoy using LEBs! I have an empire of little guys for VPNs, larger guys for apps, and big guys for databases and storage. When I'm not in front a screen I'm into German Shepherd dogs, quality knives, target shooting, theology, tabletop roleplaying games, and forest hiking.
I enjoy writing technical articles here on LowEndBox to help people get more out of their systems. You can find me on LowEndTalk @raindog308
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Two of the responses are about IPv4 address space. WTF?
My apologies. The script I use to assemble input to the finished product apparently has a bug and I didn’t catch it before publishing. The article has been corrected.