Starcloud's space bitcoin mining plan faces major hurdles

The ongoing AI frenzy is driving venture capitalists and private equity firms to invest in increasingly questionable concepts.

Starcloud, which focuses on data centers in orbit, has secured close to $500 million in funding and achieved a valuation exceeding $2 billion for a plan that appears highly challenging to implement. The company has now made it even more outlandish.

Starcloud has announced it will start mining bitcoin in space.

Regardless of one's opinion on bitcoin, the move is regarded as reckless. A key factor in bitcoin mining has always been securing the lowest-cost energy to power the hardware.

This pursuit of cheap energy can lead mining firms to leave profitable sites for new ones, swap out all their existing miners, or shift energy sources — for example, from solar to coal or natural gas, or from coal to hydro or wind.

Operating ASICs in orbit is immediately costlier than on Earth due to launch expenses, the high cost of heat dissipation, the impossibility of switching energy sources, and the expenses of in-orbit maintenance.

Thus, Starcloud is not only chasing what seem to be unattainable data-center objectives but is also producing the most costly bitcoin in the cryptocurrency's history.

Starcloud's orbital data center concept is already problematic

Even without the bitcoin mining element, Starcloud's business model has been criticized by the Institute of Electrical and Electronics Engineers (IEEE) and by YouTuber Real Engineering.

To achieve its goal of gigawatts of processing capacity in orbit, Starcloud would need tens of thousands of rocket launches and a solar panel and radiator array measuring four kilometers long and nearly one kilometer wide.

By comparison, SpaceX performs slightly more than 100 launches annually, and the International Space Station, assembled over 13 years, spans only about 100 meters by 100 meters.

Additionally, Starcloud has already launched one Nvidia H100 GPU into orbit, but it cannot operate at full capacity because the satellite overheats.

The challenges mentioned so far do not even cover other currently insurmountable hurdles Starcloud faces.

For instance, terrestrial data centers require a constant supply of replacement components and servicing, costs that would be significantly higher 500 kilometers above Earth.

Moreover, GPUs in orbit would be exposed to considerably more radiation than in a cooled terrestrial facility.

Despite these issues, the CEO continues to promote the idea, and wealthy individuals are enthusiastic. During a recent discussion with Y Combinator founders and partners, the affluent investors surrounding Philip Johnston did not pose any challenging questions and appeared willing to invest additional funds.

In summary, even if Starcloud achieves a small part of its ambitions, it will likely take more than ten years and cost substantially more than the $500 million it has already obtained.