Kazakhstan is not the promised land for miners

After the Chinese ban on bitcoin mining, many miners from China settled in neighboring Kazakhstan. The low energy price and receptive attitude of the government made it an attractive destination, but now that the miners are there, Kazakhstan turns out not to be the promised land that was hoped for.

For years, China was the number one destination for bitcoin miners. More than 60% of the total hashrate , the computing power of the bitcoin network , came from the country. Last year, however, the Chinese government issued a ban on bitcoin mining, forcing many mining companies to look for housing elsewhere. Many miners left for the United States, but neighboring Kazakhstan also proved popular.

Kazakhstan has a low energy price and the government seemed to welcome the miners, mainly because of the economic activity and extra tax revenue. In the months following the Chinese ban, Kazakhstan became the second most popular country for miners to settle; according to Cambridge estimates, by August 2021 over 18% of the global hash rate came from it.

Power failure

Yet Kazakhstan is not turning out to be the mining paradise that some miners might have hoped for. Soon after the arrival of the miners, the Kazakhstani government announced new tax rules for bitcoin mining. That was probably in line with expectations.

Less expected was the overload of the power grid and the large-scale power outages in the summer. The summer heat and increase in air conditioning were initially blamed, but after the summer, attention shifted to bitcoin mining. Since then, the attitude of the Kazakhstan government seems to have changed.

In October, the Kazakhstani Ministry of Energy limited the collective capacity that bitcoin miners can consume to a maximum of 100 megawatts (MW) for the entire sector and a maximum of 1 MW per mining center. That is very little for mining companies. Miners were also divided into two groups: ‘white’ miners with a license and ‘grey’ miners without a license. Gray miners risk being disconnected from the power grid.

In the winter, the power grid was again under pressure. On January 24, a message from the network operator followed that miners would be disconnected from the power grid until the end of the month. Around the same time, 13 illegal mining companies with a combined consumption of 202 MW were shut down by the authorities. In February, the president of Kazakhstan called for a 500% increase in the tax on bitcoin miners.

Moving again

It is a bitter pill for mining companies in Kazakhstan. Various mining companies have already changed their plans and some have started relocating again.

For example, the listed BIT Mining had started to move to Kazakhstan, but since February those plans have been scrapped and instead it is now focusing on expansion in the US. The mining company BitFuFu had already moved 80,000 ASICs to Kazakhstan, but left them behind and bought completely new equipment to mine in the US. Mining company Xive had been active in Kazakhstan for years, but closed the doors of a mining center in November and is now exploring other countries to establish itself, including the US.

Mining company Enegix is trying a different approach. With the construction of their own hydroelectric power plants, they hope to work independently of the power grid. Other large mining companies such as Genesis mining and Canaan also had big plans in Kazakhstan, but it is still unknown whether they have changed.

United States

It remains to be seen whether Kazakhstan will remain the second most popular country for bitcoin miners for a long time to come. With the changing business climate, the eyes of many miners seem to be once again on the US. Last year, according to Cambridge estimates, more than 35% of the hash rate came from the US and this year that share could well be higher.

Especially in US states such as Texas and Wyoming, and cities such as Miami, the door is wide open for bitcoin miners. Senators regularly speak positively about bitcoin and clear laws apply, so that the political risk is much lower than in Kazakhstan.

That would probably be more favorable for the climate. In Kazakhstan, people mainly burn oil and coal to generate energy, but according to reports, the majority of bitcoin miners in the US use electricity generated from renewable energy sources.

Why do bitcoin miners use so much power? You can read that here.

Related Posts

Leave a Reply

Your email address will not be published. Required fields are marked *

© 2024 Cryptocoin Budisma.net