With the Central Asian nation of Kazakhstan plunged into chaos this week, the internet shutdown of the world’s second largest bitcoin mining hub has dealt another blow to “miners” who are looking for a stable home for electric power.
Bitcoin fell below $43,000 for the first time since September in Thursday’s trading.
Less than a year ago, China expelled all cryptocurrency miners, many of whom sought refuge in neighboring Kazakhstan.
But months after these migrants set up cryptocurrency mines in Kazakhstan, protests over rising fuel prices have turned into the country’s worst unrest in decades, leaving crypto miners caught in the middle.
After dismissing his government and asking the Russian paratroopers to help contain the demonstrations, Kazakh President Kassym-Jomart Tokayev ordered the country’s telecoms provider to shut down its internet service.
The shutdown has shut down an estimated 15 percent of the world’s bitcoin mining, according to Kevin Zhang of Foundry, a cryptocurrency company that has helped bring more than $400 million in mining equipment to North America.
“Now in Kazakhstan the internet has been shut down for about 36 hours, putting public safety at risk and leaving friends and family isolated,” NetBlocks wrote in a tweet on Friday.
These events illustrate two important facts about the Bitcoin mining industry: First, the Bitcoin network is so resilient that it keeps its rhythm, even when a large portion of the miners are unexpectedly disconnected.
Secondly, the US may soon see a new influx of crypto miners looking to avoid future turmoil.
The question now is whether the United States, which ousted China as the largest bitcoin mining hub on the planet in 2021, has room to absorb more “miners.”
Bitcoin mining in Kazakhstan
When Beijing expelled all “bitcoin miners” in May 2021, Kazakhstan seemed like a logical destination, close to China, and also a major energy producer.
Mining is an energy-intensive computing process, to generate new coins and keep a record of all transactions.
Kazakhstan is home to coal mines that provide cheap and abundant supply of energy, which is a major incentive for miners, plus the Kazakh government has a more lenient stance on construction, which is good for miners who need to build physical facilities in a short period of time.
Kazakhstan is just behind the United States in terms of global bitcoin mining market share, with 18.1% of all crypto mining operations, according to the Cambridge Center for Alternative Finance.
But the government hasn’t been entirely thrilled with the burgeoning crypto-mining industry. For months, Kazakh lawmakers have instituted new rules to try to discourage mining operations, including a law that imposes additional taxes on crypto-miners starting in 2022.
Experts expect that this move will dramatically change the incentives for those looking to invest capital in Kazakhstan.
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