Bitcoin Mining in Kazakhstan Sees Months of Issues Reach New Peak With Internet Blackouts

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Kazakhstan has seen a massive upswing in political turmoil as protests set off by rising protests have descended into violence between protestors and the government. Across the country, dozens have been killed on both sides. The long-term implications of these events are still unclear. However, in the short term, the conflict has greatly affected cryptocurrency mining operations in Kazakhstan.

Cryptocurrency Mining in Kazakhstan

Many readers are likely unaware of how significant a hub for cryptocurrency mining Kazakhstan has become over the past several years. Much of the sharp rise in mining comes from the fact that Kazakhstan directly neighbors China, making it a prominent choice among cryptocurrency mining operations fleeing from China.

The exodus from China has been going on for years as the country has made progressively more severe measures against cryptocurrency mining and use. As of September 24th, 2021, all cryptocurrency transactions are illegal in China. As a result, some of the largest cryptocurrency mining operations in the world have had to pack up shop and head elsewhere. While many have chosen new locations based on economic or regulatory factors, for some, the only thing to consider was proximity.

The growth of cryptocurrency mining in Kazakhstan predates the complete ban in China. Numbers from August 2021 show that the nation was responsible for 18% of the global Bitcoin network’s hashrate, putting them at second behind the United States. Given that Kazakhstan has a population of just 18 million and a GDP of less than 1% of that of the United States, there is a staggering overrepresentation of cryptocurrency mining in Kazakhstan.

Unprecedented Internet Blackouts Bring Operations to a Halt

As part of their reaction to ongoing protests, the government of Kazakhstan implemented internet and communications blackouts across the country. Along with the general unrest, these blackouts ground cryptocurrency mining to a halt.

At the peak of the blackouts between January 5th and 6th, the global Bitcoin hashrate dipped by as much as 11%. That’s the total global hashrate, not just that of Kazakhstan. While the loss has stabilized somewhat, global capacity is still down around 2%.

These events are certainly one of the primary factors behind a sudden drop in the price of Bitcoin and other cryptocurrencies as the blackouts were happening. From January 5th to the 6th, Bitcoin dropped from about $46,000 to about $43,000 and slid even lower to $40,600 in the following days.

The fact that Bitcoin has gained a bad reputation due to various get-rich-quick schemes like “Immediate Edge” does not contribute to the reputation this digital currency has received either. In fact, regulators in many countries are issuing warnings in regards to these types of scams.

Kazakh Miners Face Difficulties Even Before Conflict

While the conflict in Kazakhstan could be the final nail in the coffin for cryptocurrency mining there, it certainly wasn’t the first. The large influx of cryptocurrency mining operations had already been noted as an area of concern by the government long before the chaos broke out.

Many incoming mining operations chose Kazakhstan for its supposedly low energy prices. However, the influx of power consumption quickly began to be too much for the aging power grid in Kazakhstan. The government has stated that cryptocurrency mining, at one point, accounted for 8% of the country’s total electrical capacity.

In reaction to the massive consumption brought on by cryptocurrency miners and escalating blackouts in October 2021, the government began categorizing registered cryptocurrency minors as low-priority and among the first options to unplug if the grid reaches capacity.

Large cryptocurrency operations could only operate during lulls in electricity use, being unable to operate during peak hours from around 6 pm to 10 pm. The demand from Kazakhstan’s population for heating and other electrical use peaked in that time frame, and so the government would shut down cryptocurrency miners to ensure that the grid didn’t become overly stressed.

Kazakh Cryptocurrency Miners Running Out of Options

At one point, there was some hope from within the Kazakh cryptocurrency mining industry that better times would come after the winter. With less electricity used for heating, there would be more available for cryptocurrency mining and no need to ration power.

Today, many cryptocurrency mining operations are trying to find a way out of Kazakhstan. Unfortunately, they have few options available besides hoping for the best. Most major cryptocurrency mining centers around the world are seeing a lack of available facilities and resources. Even if operations can afford to pack up and ship out, there’s simply nowhere left for Kazakh cryptocurrency miners to go.

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