Decentralised Data Centres

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A Decentralised Future

Demand for centralised data storage remains strong, but future growth in digital infrastructure will disproportionately flow to providers capable of servicing a growing demand for in-house or co-location facilities, which store data closer to where it’s needed to improve response times and save bandwidth.

While the megatrend is still in its infancy, decentralised data centres are already flourishing. Take Vapor IO, a start-up that last year partnered with cybersecurity heavyweight Cloudflare to develop a data centre in a fridge-sized box that can be used anywhere.[1] Building the right infrastructure to support so-called ‘edge computing’ is especially important in servicing 5G and Internet of Things (IoT)-enabled devices. And it responds to government and private sector concerns about leaks and hacking – a growing number of organisations require that all data must be kept within their own borders or walls.[2]

Another driver of data centre decentralisation is a realisation among customers that centralised cloud infrastructure might present more risks than previously imagined. A customer remains vulnerable to a single point of operational failure within the service provider, or a politically motivated decision to turn the lights off. In January 2021, AWS banned social media platform Parler from accessing its services because of its supporting role in inciting violence at the US Capitol. As a result, Parler was effectively shuttered overnight.[3]

Right or wrong, the decision highlights the power vested in unelected big tech executives. For many customers, an alternative model that decentralises computing and storage power, is censorship resistant, and democratises access to data is a more attractive proposition. Decentralised data is also better at supporting the main use cases of edge computing, which will soon be universal (IoT, 5G and some deep learning applications).

The implications of this shift from centralisation to decentralisation are profound – new opportunities will emerge for companies capable of providing affordable, transportable, low-latency, modular data solutions where they’re needed.

Immersive Data Centres

Data centres continue to evolve in other interesting ways. In 2018, Microsoft sunk a server farm off the Orkney Islands, connecting it to land via a cable. The aim was to evaluate the feasibility of building data centres underwater. In September 2020, the results came in. The aquatic data centre had one eighth the equipment failure of those built on land. Nitrogen use (instead of air) cut down on corrosion. Cooling costs were significantly reduced. And rent

was almost non-existent. Ben Cutler, the engineer in charge of the project, says submerged data centres could one day be co-located with offshore wind farms as ‘anchor’ customers.[4]

E-waste and Bitcoin Mining

E-waste generated from discarded mining equipment is a major environmental concern. Bitcoin critic Alex de Vries estimates that cryptocurrency mining produces about 25 million pounds of e-waste each year – equivalent to the total e-waste output of Luxembourg.[5] De Vries argues that needless waste is intrinsic to Bitcoin mining, because equipment is routinely made obsolete by either next generation (faster) equipment or a steep fall in the Bitcoin price, which makes mining uneconomic.

E-waste wasn’t a big problem in the early days, when multi-purpose CPUs were used to mine Bitcoin. But the need for more processing power saw CPUs replaced with graphics cards (GPUs) and then Field Programmable Gate Arrays (FPGAs), until miners arrived at Application-Specific Integrated Circuits (ASICs) as their equipment of choice.

De Vries claims that because ASICs are hardwired for a single task – mining Bitcoin – they can’t be repurposed for any other use case, not even for mining other cryptocurrencies.[6] This is debatable. While ASICs are designed for optimising Bitcoin hashing, their impressive computational power means they can be tailored for different applications relatively easily. The repurposing of ASICs presents a largely untapped commercial opportunity for miners, and also mitigates a major environmental (reputational) risk.

Green Data Centres

Bitcoin mining data centres are now industrial-scale operations, with management expertise and servicing levels on par with cloud data centres.[7] Their growing scale has led to a larger carbon footprint. One study claims around half of all global data centre energy usage can already be tied to Bitcoin miners.[8]

Given their intensive energy usage, Bitcoin mining and cloud-based data centres alike are being forced to grapple with the reputational and financial implications of climate change. This includes increasingly stringent procurement standards from customers, who want their data powered by renewable electricity wherever possible. Their demands are prompting some operators to integrate on-site renewable generation into their business models.

Google has responded to these climate concerns by pledging to source carbon-free energy for all its data centres and campuses on a 24×7 basis by 2030. While Google’s commitments are ambitious, Microsoft Azure arguably sets the industry standard. It plans to eliminate its reliance on diesel fuel by 2030 – a decision which has implications for all data centres using diesel-powered generators for backup power. Azure has also pledged to meet four ambitious environmental targets that will support local communities.

Decentralized Data Centres Graph 1

 

Azure’s targets are equally applicable for any Bitcoin mining data centre operator looking to mitigate environmental risk and establish a competitive advantage as an early adopter of green infrastructure.

Megatrend summary: Decentralised Data Centres
  • While centralised cloud adoption continues to grow, 5G, IoT-enabled devices, deep learning, hacking and censorship concerns will support the rise of smaller data centres located closer to where data is needed.
  • New opportunities will emerge for companies capable of providing affordable, transportable, low-latency, modular data solutions where they’re needed.
  • E-waste from discarded Bitcoin mining equipment is an environmental (reputational) risk that could be reconstrued as a commercial opportunity.
  • Microsoft and Google are green data centre pioneers and will likely force the rest of the industry to follow.

Footnotes

1 Sverdlik, Yevgeniy, Vapor IO to Bring Cloudflare to the Edge in 36 US Cities, 22 January 2020, https://www.datacenterknowledge.com/vapor-io/vapor-io-bring-cloudflare-edge-36-us-cities 

2 The Economist, The Era of the Cloud’s Total Dominance is Drawing to a Close 18 January 2018, https://www.economist.com/business/2018/01/18/the-era-of-the-clouds-total-dominance-is-drawing-to-a-close  

3Vincent, Brittany, Parler Goes Offline After Amazon Drops AWS Support, PC Mag, 12 January 2021, https://www.economist.com/business/2018/01/18/the-era-of-the-clouds-total-dominance-is-drawing-to-a-close  

4 The Economist, Davy Jones’s Data-Centre, 19 September 2020, “https://www.economist.com/science-and-technology/2020/09/17/davy-joness-data-centre  

5 Paben, Jared, Crypto-Contex, E-scrap News, 22 June 2020, https://resource-recycling.com/e-scrap/2020/06/22/crypto-context/ 

6 Ibid

7 ARK Invest, Bitcoin Mining The Evolution of a Multibillion Dollar Industry, 9 March 2020, “https://research.ark-invest.com/bitcoin-mining-white-paper” 

8 Great Wall of Numbers, Bitcoin and Other PoW Coins are an ESG Nightmare, 14 February 2021,“https://www.ofnumbers.com/2021/02/14/bitcoin-and-other-pow-coins-are-an-esg-nightmare/” 

9 Miller, Rich, Microsoft Plans to Stop Using Diesel Generators by 2030, Data Center Frontier, 22 July 2020, https://www.datacenterknowledge.com/vapor-io/vapor-io-bring-cloudflare-edge-36-us-cities 

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