Kazakhstan, clinical death of Bitcoin
After China introduced a ban on Bitcoin mining at the end of last year, Kazakhstan became the second country in the world with the largest number of computers on which the most expensive cryptocurrency in the world is “mined”, right behind America.
The global computing power of the decentralized network has plummeted, hitting a fast-growing cryptocurrency mining industry as a result of the Internet shutdown.
The value of Bitcoin on Friday fell to its lowest level since September, to less than $43,000 per BTC.
According to CoinDesk, the value of Bitcoin at the time of writing is 41,959.72 US dollars and increased by 268.65 dollars in 24 hours.
The media report that in the meantime, the Internet has been established in the capital of Kazakhstan, but that the mobile Internet is still not functioning after the shutdown due to the riots.
After China imposed a ban on cryptocurrency mining, many “miners” moved their activities to neighbor Kazakhstan.
According to the Diplomat, there are currently twenty cryptocurrency mining farms in Kazakhstan.
The data are different, but it is estimated that Kazakhstan has 15 to 18 percent of the global “hash rate”, ie the total amount of computing power used by computers connected to the Bitcoin network.
No internet, no mining
The more “miners” online, the more computing power is needed to mine new Bitcoin.
“Hashrate” falls if the miners leave the network, theoretically making it easier for the remaining miners to produce new coins, according to Reuters.
Of course, this is impossible without the Internet. One of the cryptocurrency miners from Kazakhstan, Didar Bekbau, stated on Twitter that “there is no mining without the Internet”.
But after about sixty hours, the internet is slowly returning to Kazakhstan.
According to the data of NetBlocks, the organization that deals with monitoring the interruption and shutdown of the network, it is at the level of about 40 percent in relation to the period before the shutdown.
According to the ABC, what happened in Kazakhstan shows two important things about Bitcoin.
On the one hand, the network is more resilient than previously thought, and on the other hand, the events in Kazakhstan mean that a larger number of miners could decide to move their activities to the United States in order to avoid interruptions.
Kazakhstan and cryptocurrency mining – energy and abundance
According to the Diplomat, Kazakhstan is suitable for “mining” primarily due to relatively cheap energy.
Kazakhstan offers an attractive market, with prices per kilowatt-hour averaging about 5 cents, compared to the price of 9 to 11 cents needed for that amount of energy in Russia, China, and the United States.
About half the price, Kazakhstan’s financial data on cryptocurrency mining looks better than the competition.
In June 2020, President Kasim Jomart Tokayev approved amendments to the country’s “digital code”, effectively legalizing cryptocurrency mining in Kazakhstan.
In addition, mild regulations make banks start offering cryptocurrency accounts, giving the market incomparable potential.
According to the recent amendments to the Kazakhstan Tax Code, from January 2022, cryptocurrency miners will have to pay another additional amount of 0.23 cents per kilowatt-hour, which will enable the government to collect more taxes from mining.
The problem of environmental protection and the gray mining zone
Despite lower-priced energy, there were several power outages in Kazakhstan last year, prompting the government to turn to Russia to offset growing demand.
A sharp increase in consumption, at the same time, burdening the network.
The Deputy Minister of Energy of Kazakhstan, Murat Zhurebetov, stated at the time that one of the reasons for the increase in consumption of 8% was illegal mining in the gray zone.
The main sources of electricity supply for mining are gas and coal power plants (which make up 70 percent), and the share of “miners” is about seven percent.
Given that two-thirds of the energy produced in Kazakhstan comes from fossil fuels, the question of carbon footprint, ie environmental pollution, also arises.
Kazakhstan, which exports most of its quality coal, has an even higher rate than China’s former rate.
According to the World Energy Agency, the Guardian reports, Kazakhstan emits 1,500 grams per kilowatt-hour, while in China it used to emit 1,000 grams.