Crypto Mining ICOs / whitepapers review: Hydrominer, Ice Rock Miner and Envion. Solving a software problem with hardware.

Michal Bacia
Dec 11, 2017 · 16 min read
The price of bitcoin reported by Google on 10th Dec 2017

Back in November I was approached by a marketing company working for Envion. They asked if I would be interested in writing something about Envion and their forthcoming ICO. I responded that I’d need to have a look at their website and whitepaper first. I did, as well as researching their competitors. I had questions. I sent them over but never got answers. This made me even more interested in writing a review, so here it is.

Before you read any further people, be aware of the following:

  1. This article is NOT investment advice.
  2. If you are looking for investment advice, here it is: invest in yourself, in your knowledge, understanding of the technology and economics, and in experience.
  3. If you are really interested in crypto do your own research. A lot of it! Don’t take anything I, or anyone else for that matter, says at face value. Trust no one. Including me. I can only present my thoughts and opinions on the subject. I don’t even try to pretend I know THE truth or THE answer.
  4. I will discuss some very complicated and complex ideas and technologies (like Proof of Work, mining) in the simplest way possible. But this requires (over) simplification and using analogies that are not always perfect or accurate. Luckily, with the internet you can find plenty of resources on the subject.

What is crypto mining?

For the purpose of this article, let’s define mining as a business process that generates crypto coins (like bitcoin or ether) using powerful computers. This is the miners’ perspective. They buy powerful hardware, connect to a network that manages a specific cryptocurrency and run specialized software to perform a lot of computations (which usually requires a lot of electricity). By doing this, they process and validate transactions for the network and maintain its integrity (the more computing power for the network, the more difficult it is to corrupt it for a potential attacker). In return, the crypto network pays miners for their services in its own cryptocurrency. Long story short, it’s like you getting paid by someone to use your computer power to run their accounting software. And they also pay your neighbour, and the guy in the next city for their computer power so its spread out among computers to keep it safe. But it means a lot of computers running all the time.

Only crypto networks based on a Proof of Work algorithm require mining, including the biggest 2 (by market cap): the bitcoin network and Ethereum. There are also other algorithms (Proof of Stake, for example) that do not require mining as described here, so no raw computing power and high electricity consumption is needed.

Originally, the bitcoin network started from an idea of creating a decentralized payment system, run on thousands or millions of personal computers doing the mining. However, the bitcoin rewards for mining are only paid to miners who perform the calculations the fastest. This resulted in 1) a constant race between miners who want the most powerful hardware to finish computations first and 2) miners joining forces in mining pools, to average out the chances of receiving the mining reward (just like lottery pools).

Thus, ‘casual’ mining on a laptop is no longer profitable and professional mining became a highly specialized business.

Miners’ Business Model

The business model of a professional crypto miner looks like this:

  1. The initial investment is spent on hardware.
  2. There’s the running cost of hardware; mainly electricity and maintenance (to make sure the hardware operates 24/7).
  3. Income is paid in cryptocurrency. It needs to cover the running costs, repay the initial cost of hardware and (hopefully) generate a profit.

This is a very common model for infrastructure investment in general, including power plants or hotels. The initial investment in the asset has to be recovered with profit by the revenue generated by the asset. The basic assumptions behind this particular mode are the following:

  1. The price of the cryptocurrency will not decrease (it will increase, or at least stay stable).
  2. It is more profitable to invest in the mining process than to simply buy the cryptocurrency directly. For example: Investing, say $1,000 in mining bitcoins in the beginning of the year will generate more bitcoins over the year, than simply buying $1,000 worth of bitcoin in the first place.

This means the miner, as well as every other asset investor, has to manage the risks involved resulting from the assumptions above. Specifically: they should mitigate the risk of cryptocurrency price drops, make sure they keep electricity and maintenance costs low and their hardware is always powerful enough in the arms race to mine enough new crypto coins. The fancy term ‘risks management’ basically means answering the following questions about something that can happen in the future that is different than now: how will the change affect the business, can we prevent it, how much would the prevention cost. For example: right now bitcoin costs $15k. In 1 month it can cost $5k or $50k. If it costs $5k, we can’t afford to pay the electric bill. Can we prevent it from happening (one option would be to pay the bill in bitcoin)? How much would it cost (the lost profit if bitcoin stays at $15k or higher)?

Cloud Mining

One way of managing risks is to pass them on to third parties, like clients. This is how and why cloud mining works. Cloud mining is a service that professional miners offer to the public. Anyone can rent some of their computing capacity for a specific period of time to mine crypto. The clients pay an agreed fee for the hardware rent and cover the operating costs and can keep whatever coins the hardware was able to generate. This way the miners can pass some or all the risks to the clients and have stable cash flow, to cover their own capital and operating costs.

For potential clients, renting computing power from a third party has to be more attractive than investing the same money in buying hardware directly and setting up mining operation themselves. Additionally, the benefits of cloud mining have to outweigh the additional risks related to having to trust a third party, the mine (A client is paying for computing power, but how can he really know what is he getting?).

Is it even possible for cloud mining to be a more attractive offer? It can be. One factor is centralization: the unit cost of building and running a huge data center is lower than running a small operation. You get better hardware prices when buying in bulk. The fixed costs of maintenance (hiring an engineer) can be spread over more computing power.

Most importantly, a cloud miner can have access to much, much cheaper electricity. Mining in Germany and paying retail electricity prices (about $0.36/kWh) is not profitable at all. Mining in the former Soviet Union and paying only $0.03/kWh is very profitable. This is what the 3 analysed mining projects want to accomplish: provide price competitive cloud mining services based on access to cheap electricity and low(er) initial hardware costs.

Here’s the review of 3 crypto mining projects: Hydrominer, Ice Rock Mining and Envion. I focused on their business model, their team and experience, and the token economics while also trying to answer where the value of each token comes from.


Business model

Set up mining operations inside existing hydroelectric power station in the Austrian Alps. This idea has many advantages. The project is located in the EU, so in a very stable environment with a long tradition of respecting contracts (like the power purchase contracts for mining operations). The maintenance and repairs are easy as all sites are within a relatively short drive. Electricity is very cheap for Europe (EUR 0.045/kWh), because it’s bought directly from a hydroelectric power station, with no transmission or distribution costs. The electricity is 100% renewable and is available 24/7.
HydroMiner offer their cloud mining packages based on electricity consumed, where most other miners price services based on computing power (‘hash rate’) and operating costs. Maybe it’s easier to calculate the return and benchmark past to present performance, but ultimately it doesn’t matter that much. In the end, it all boils down to how many crypto coins a cloud miner can generate per $ invested.

Team / Experience

The team is young, but for the crypto space it has a lot of experience with mining. The 2 founders started mining in 2014, the CTO in 2012. What’s more interesting is that HydroMiner already have 2 operational mining sites in Austria and they offer an opportunity to visit them.


HydroMiner’s tokens, H2O, can be redeemed for cloud mining services offered by the company. H2O is therefore store credit you can purchase in advance, at a discount. This is a very reasonable, easy to understand approach. The buyers/investors shouldn’t expect to make a fortune on this ICO. However, if someone is already interested in cloud mining this might be a good deal for both parties. The buyer ultimately gets some cryptocurrencies (the final product of cloud mining) cheaper than the market price and HydroMiner has risk free capital for expansion.

Ice Rock Mining

Business model

Set up mining operations inside a post-soviet secret bunker (!) inside a mountain (!!), so you benefit from one of the cheapest electricity prices in the world ($0.03/kWh) and year-round low ambient temperature (no cooling costs). This is probably one of the most cost efficient mining projects out there. Its located in Kazakhstan, which is good when costs are a concern. But it might be a disadvantage where maintenance and repairs are concerned (availability of hardware, reaction time) or when dealing with local contractors and authorities (unforeseen extra costs or delays with permits etc.).

The cheap electricity is supplied by a hydroelectric powerplant, so it’s renewable and available 24/7.

Cloud mining is offered on a ‘per hash rate’ basis.

Team / Experience

The team is young and seems to have some personal mining experience. However, I couldn’t find any professional crypto mining or data center experience in their track record. Ice Rock Mining currently doesn’t have any operational sites, the secret cave bunker is empty. I think this is the biggest risk in this project. Building and operating a data center inside a mountain is a difficult project for an experienced team and these guys are just starting and have a lot to learn.

The first ICO round was done this November, so now we have to wait until the end of December (as per the roadmap) for the official launch. The first operational report is supposed to be released by February 2018.


Again the tokens, ROCK, can be redeemed for cloud mining services offered by the company. ROCK are also supposed to be purchased back by Ice Rock Mining at a fixed price ($2 in Feb and $3 in May 2018). I didn’t see any details of this operation, like timing, volume, how many token will be repurchased, etc. This part sounds alarming. Phase 1 of the ICO offered ROCKs at $1.2 in early November. Buying them back at $2 in early February means paying 166% more in 3 months, or 664% annually! Why would you do that? That’s probably more than loan sharks would charge. The most recent famous example of such a business practice was Bernard L. Madoff Investment Securities LLC and Charles Ponzi a bit earlier. I’d love to hear from the Ice Rock Mining team and understand a bit more about this part of the plan.


Business model

Build mining sites inside standard shipping containers and ship them around the world, so they can be installed close to cheap and/or renewable energy sources. This is their way of creating “World’s Most Profitable Standard of Self-Expanding Crypto Infrastructure”, as they say on their website.
Envion claim they have a database of places in the world where you can connect to cheap electricity. In this case, the most cost efficient option is to select the one that provides the lowest total mining cost (electricity, maintenance, shipping costs, rent etc.), like Kazakhstan for example, and send all of the containers to this one place. This would lower the cost of maintenance even further. So why would you send the containers all over the world instead?

I’m not sold on the idea of building the mining site in one central location and then sending it to remote sites, especially by sea. Think about traveling just with your laptop and all the sleeves and special padded bags. Now think about installing $100–150k worth of very specialized hardware inside a shipping container, connecting it all and putting it on a truck, a boat, a truck again and handling it by cranes all the way. I don’t think it will be plug and play. Rather plug, check what needs to be fixed, fix it and then play.

The idea of powering crypto mining sites with renewable energy is great. However, mining has to be done 24/7 to be profitable. Installing mining containers on solar/wind farms and using their surplus capacity will not be profitable at all, unless there will be a secondary source of renewable electricity when the farm is not generating enough. It turns out that the cheapest, most reliable renewable electricity right now comes from… yup, hydroelectric powerplants.

Envion is really selling (too) hard the concept of decentralization. The mining operations are centralized because of the mining algorithms and the rules (the code) governing cryptocurrency supply transaction fees etc. It’s the way bitcoin and other currencies are set up that drives the ‘arms race’, centralization and demand for low cost electricity. Miners centralize and create mining pools because the market makes it the most profitable approach, not because there is a crypt-conspiracy. A decision to run decentralized operations all over the world is fine, but this business will not be competitive against the HydroMiners and Ice Rock Miners of the world. And, assuming these mining sites all over the world are competitive and more and more are brought on line, they are still owned by a single company — Envion. How decentralized is this?

Finally, the cooling system: “More than 40 times more efficient than traditional data centers, ENVION’s patented cooling system outperforms virtually any other data center.” I’d say, if you have the most efficient cooling system in the world, screw the mining business. Sell your license to other miners and the Googles and Amazons of the world.

It looks like an overly complicated approach to problem that has a simple, straightforward solution. I prefer simple solutions, something like what HydroMiner and Ice Rock Mining are proposing.

Team / Experience

Team members have a lot of experience with finance, media, consulting, marketing and software development. I have to admit their marketing and press materials look really good and very professional. However, I couldn’t find any information about backgrounds in crypto mining, data centers or logistics. Envion claims it has one mining container unit operational. Again, I couldn’t find photos or videos of a connected operating unit. The photos on their website show a mining container parked in front of a solar farm, but it’s not connected to anything. There is a ‘mining dashboard’ on their website, but there’s no way to verify what is it actually showing.


Envion token (EVN) holders will receive earnings from mining operations and have voting rights. So EVN is a security and therefore limitations apply to US and Swiss citizens (general public can’t be offered unregulated securities). I couldn’t find any specific detail explaining how earnings will be calculated, how they will be distributed or how voting works.

I did find a calculation showing a 166% return on investment and how to turn $50k into almost $900k in 5 years. There are no details regarding the assumptions and variables running the financial model and generating these numbers. I have to admit it’s not even close to Ice Rock’s 664%, but it makes me think how close to Madoff’s territory is it.

The financial plan shows profits for the next 5 years. I bet anyone that the mining business model will change during the next 12 months. It has to. Otherwise, given the current trend, by 2020, the energy to mine bitcoin alone will surpass the entire world’s electricity production!

Dear Envion team,

I’m really sorry no one replied to the email I sent regarding your ICO. Maybe you never received it, maybe you missed it. Just in case, I’m pasting it below, so you can read it now and hopefully reply. I’m happy to include any insights I receive from you in this article later on.

“Envion, with the founder coming from solar industry presents a pure project (asset) finance approach. They want equity from the investors and looking to pay back dividends. So, I’m trying to find any sort of business plan calculations backing up their promises of 161% ROI. A spreadsheet with assumptions (about costs, price of crypto mined, performance etc.) and a business model would be nice.

Here is a list of more specific questions:

  1. Envion wants to run on renewable energy. This is great, but solar and wind energy is intermittent. And you need 24/7 power supply to make mining profitable. How do they want to solve this?
  2. Cost of the container with mining rigs is a constant. The only variable is transportation cost and cost of electricity. So, the rational approach is to find the cheapest electricity as close to the manufacturing place and send all containers there. But this raises the question of decentralization and sending the containers all over the world. Why would you do it, instead of concentrating them all together in the place with cheapest electricity (next to a Chinese nuclear power plant for example)?
  3. Envion is talking about installing the containers in remote locations, so I’m assuming far away from the nearest hardware supplier. What about servicing and maintenance? What is the reaction time for replacing a broken rig?

And a more general, but a fundamental question:

How long are they planning to operate? Because essentially this business model is solving a fundamental software problem (energy intense network consensus mechanism) with hardware. What if the software changes and solves this problem altogether (proof of stake, proof of time-stake)?”

Solving a software problem with hardware

As I mentioned above, the mining business model has to change. When the bitcoin network was launched, no one fathomed how big it would and will grow or how many resources will be committed to mining. Currently, there are over 1,300 cryptocurrencies and tokens. Most of them use a Proof or Work algorithm and require mining. Bitcoin alone uses about 30TWh of electricity per year. It’s a lot. More than Serbia and closer to Denmark’s energy consumption. It’s ¾ of the annual electricity generated by the Hoover Dam.
But, to put things into perspective, the consumption of all data centers in the world in 2015 was about 416 TWh.

All as a result of the algorithm that decides that winner (the fastest miner) takes all and rewards concentration, ‘arms race’ and excessive energy consumption. It is a software or, more accurately, , a governance problem that miners (including the above ones) are trying to solve with hardware. There are crypto coins out there now that do have a negligible energy consumption — Solar Coin for example.

Cryptocurrencies will evolve. Governance, rewards and incentives for maintaining the network will change. Mining by inefficient brute force will become obsolete but it will not happen overnight. Different cryptocurrencies will transform at different rates. So the mining business model still has some life left. Maybe a year, maybe two. But I wouldn’t bet on 5 years.

If you like this article you might also be interested in the series I’m writing about crypto for non-technical people like myself. Part one is available here:
A lawyer friend asked me about bitcoin, blockchain, investing and bubbles

Please feel free to post your comments or questions here, get in touch on twitter ( or Linked In ( )


Update on 21/Dec/2017

Envion did reply to me on twitter. I wasn’t happy with their answers, so I asked some more specific questions. Here’s the link:

You can follow the thread and all the Envion answers and my further questions in the comments.

I was also contacted by someone who is an investor in the cloud mining industry. The person wants to stay anonymous and is afraid Envion will give a bad reputation to the entire industry and ICOs. Here are just some issues raised by this person. I think it makes sense to listen to in industry insider:

161% return is basically impossible in mining. It happens only due to the gains in currency skyrocketing, in this case it would have been also great to just keep the currency.

The container “technology” they present is ridiculous, it mixes s9 miners that need a temperature of max 40 C with GPU miners that run at 70 C, this does not work other than in cold winter.

They have a 100KW or 60 GPU computer in a container, that’s not much, we have an up to 200 GPU computer in a container and there is no need for special cooling or 50 holes in the container; 2 very large fans are fine

They fantasize about building 200 such units a month, crazy, it takes 3 people and a whole month to build ONE, and they must know about electricity and mining and work efficiently. You can’t find and organize people so fast nor find the mining equipment or the necessary electrical equipment so quickly.

Envion claims that they have pre-orders with producers of asics etc. This is nonsense, there is no such thing. Prices change 2x a day and if you want to buy, you just pay and get it delivered, there is no need for a contract.

They claim they can purchase large amounts of asics. Impossible! The market is empty right now and always tight.

Their calculation is based on an asic cost of 1700 USD/pcs. Current prices are 5000 USD plus VAT, plus transport etc. No need to say their ROI calculation does not work on that base.

In their calculation they have only a 25% hardware reserve. Reinvesting 25% of the mining proceeds will no work. We usually keep 65% of the proceeds to have a profit and to be able to keep the hardware at a competitive level.

They make the calculation net (with no VAT). In fact, all over Europe, Canada and many other countries, they will not be able to get the VAT back because the mining is not subject to VAT.

They present the business model as if every power plant would be in a position to power their containers. This is not possible because transformers and cabling are expensive: installing a transformer, switches and cables cost anywhere from 20 to 50 K USD for a facility and can take 2 or more months.

As per the “mobile” mining solution: there is no point to move containers around, it’s very costly: transportation, insurance and hardware problems after transport are frequent. Additionally there are problems with humidity and a lot of paperwork if you cross country borders.

They consequently did not answer questions on telegram or elsewhere and deleted every account that asked critical questions.

Why are we saying all of this? They can’t deliver and will create many angry customers. It will make regulators in central Europe angry and will make the whole ICO market look bad and force more regulations.

To sum it up:

  1. Envion doesn’t answer any reasonable, specific questions.
  2. Industry insides are calling them out on their bull$hit.
  3. If something looks like $hit and smells like $hit, I wouldn’t recommend putting it into your mouth hoping it’s chocolate.
  4. The people running Envion are either ignorant or cynical. Either way the investors will lose their money. I’d short them if it was possible.

Update on 9/Jun/2018

…and now it’s in the The New York Times

I feel bad for the people who lost their money, but is this the moment I get to say: ‘I told you so…’?

More reading

If you made it this far, you are probably thinking about investing in an ICO or cryptocurrencies. You might enjoy reading this:

A lawyer friend asked me about bitcoin, blockchain, investing and bubbles

A lawyer friend asked me about bitcoin… Part 2: Picking and Buying Coins

A network of business & tech podcasts designed to accelerate learning. Selected as “Best of 2018” by Apple.

Michal Bacia

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A network of business & tech podcasts designed to accelerate learning. Selected as “Best of 2018” by Apple.

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