TOKYO — It is early June, and an air of enthusiasm fills a former lace factory in Fukui, a city of around a quarter million people on the Sea of Japan coast. Around 500 servers fill a space the size of three tennis courts, radiating heat through the building, as cooling fans whir. Employees sweat constantly.
The building is home to a virtual currency mining startup founded by a former employee of a Japanese megabank and major securities trading house. In Fukui, electricity and setup fees are low, a huge advantage for venture businesses keen to trim costs. Hopes are high in the area that more such businesses will come.
Alt Design, based in Tokyo, has been operating this 24-hour-a-day virtual currency mining business since September last year, focusing on cryptocurrencies such as bitcoin and Ethereum. Miners use fast computers to solve cryptographic ciphers and record transactions on a shared ledger called a blockchain. They earn virtual currency in exchange for the number-crunching.
The company has about 10 workers who install and manage the equipment. In theory, the servers should generate about 200 Ethereum coins a month ($86,000).
“Industrial-use electricity is cheaper [in Fukui] than in Tokyo, and we can cheaply rent a large space that fits all our equipment,” said Shuhei Fujise, also a former banker, who serves as Alt Design’s chief analyst. The facility can use up to 2,000Kw of electricity, equal to about 2,600 households.
The City of Fukui also has a subsidy program that pays half the rent for companies moving into unused factory spaces. The city welcomes information technology companies to support its development, according to an industrial promotion body.
Until recently, most big cryptocurrency miners have operated in mountainous areas of China and in Scandinavia, which offer cheap hydroelectric power. Japanese investors have poured money into these overseas mining businesses.
Fujise is confident Alt Design can survive in Fukui. “Electricity pricing is still somewhat higher here than overseas, but there is demand for an agile company like us, and to actually be able to see the people running the operation,” he said.
Alt Design mostly mines using equipment from their customers, taking a portion of the currency generated as a commission with the rest going to clients. It has about 10 corporate clients and is constantly turning away others, it says.
Japanese companies moving into the business in anticipation of future growth. One, DMM.com, has set up Japan’s largest cryptocurrency mining operation in the central city of Kanazawa, while GMO Internet has one in Scandinavia.
Alt Design is a young company. Employees are around 30 years old, on average. Many have left financial institutions to get into the virtual currency business. There are risks: Competition from large overseas players is growing, and the regulatory landscape is changing around the world.
But like wildcat miners on a quest for gold in centuries past, today’s cryptocurrency miners are willing to take on the hazards in hopes of striking it rich.