A country without electricity because of Bitcoin miners

Many parts of Kazakhstan are suffering from power shortages due to the increase in cryptocurrency mining in the country.

Matthew Heard, a software engineer based in San Jose, expressed concern about his 33 bitcoin miners in Kazakhstan. In the past week, the country has repeatedly turned off the electricity to restrict energy supplies for cryptocurrency miners.

“It has been many days since miners started connecting to the network. But for the past week they’ve been almost inoperative, ”said Matthew.

Electricity shortage because cryptocurrency miners come from China

Kazakhstan is struggling to deal with widespread power shortages caused by cryptocurrency mining in the country. To make matters worse, Bitcoin miners migrated massively from China to the border with Kazakhstan in May.

Cryptocurrency mining in Kazakhstan has stalled due to a power outage. Photo: Reuters.

Last month, the country’s three largest thermal power plants had to be shut down. Coindesk said that after the incident, the Kazakh energy ministry began preventing cryptocurrency “mining camps” from consuming more than 100 MW of electricity within two years. At the same time, the federal network operations center warned that only 50 state-registered miners should be allocated electricity. Also, when the network has problems, those deals are cut first.

The mining of cryptocurrencies is putting pressure on the Kazakh power grid. As a result, many cities and villages in six regions of the country have been without electricity since October. The country’s energy ministry estimates that electricity demand in the Central Asian country has increased 8% since early 2021 after utilities’ cryptocurrency mining companies migrated from China. Before that, Kazakhstan only increased 1-2% of electricity consumption per year.

According to the Financial Times, at least 87,849 cryptocurrency miners have been relocated from China to Kazakhstan.

Xive.io, a Kazakh company that provides mining equipment to foreign miners, had to close a major hub on November 24th. They dismantled 2,500 mining platforms because there was no electricity to operate.

“Too much work, hope our company doesn’t collapse,” wrote Didar Bekbau, co-founder of Xive.co, on Twitter on November 24th.

The Kazakh authorities believe that a group of “gray miners” (illegal companies) caused electricity shortages in the country. The Department of Energy estimates that these companies have taken 1,200 MW off the grid, more than twice as many as “white miners” (government registered companies).

To make up for the shortfall, crypto miners will have to add 1 Kazakh tenge ($ 0.0023) per kWh. However, until the regulation is in place, Kazakhstan will have to negotiate with Inter RAO, an energy company based in Moscow, Russia, to buy more electricity.

“Buying electricity from Russia will certainly solve the problem in the short term. But I think there has to be a big discussion about the energy policy that Kazakhstan is pursuing, ”said Luca Anceschi, Professor of Eurasian Studies at the University of Glasgow (Scotland).

He suggested that the Kazakh government focus on the profits from BTC mining regardless of electricity production capacity. “It is one of the most energy-rich countries in Asia. In theory, there shouldn’t be electricity bottlenecks, “said Anceschi.

Given this situation, some companies have tried to relocate their excavators from Kazakhstan.

“Kazakhstan was the first place I brought the rig because the electricity was cheap. But now the energy was completely lost. I will bring my machines to Russia, ”said Ricky Hoo, an Australian miner who owns 40 cryptocurrency mining machines in Kazakhstan.

Power shortages due to cryptocurrency mining are not unique to Kazakhstan. Iran banned cryptocurrency mining from May to September to prevent the problem of power shortages.