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The trouble with crypto mining operations in Kazakhstan

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After China's recent ban all crypto mining operations within its jurisdiction, virtually all miners have moved out of the country. During the aftermath, some operators have moved in to neighboring Kazakhstan - perhaps because it is closer to China, or maybe because it offers cheap electricity.


For a while, this seemed like a good move... until problems began to surface. First, while electricity maybe cheap, it is not stable enough. There are reports of power outages in the country for varying reasons; the most likely is that the country is not fully prepared enough to handle the massive energy demands of crypto miners. To complicate matters, another reason has surfaced: the recent anti-government protests in the country (which we should not discuss further here).


Crypto mining in Kazakhstan is no joke. For Bitcoin alone, the country has at one point provided around 18% of the global hashrate as reported here.


So while some miners in Kazakhstan might contemplate on moving elsewhere, they may not be able to handle the logistics involved in moving their hardware out. And while they might be able to do so, they already got beaten by other miners who got first dibs on other more "safer" havens like the US. Or at least for the moment. Ultimately it will depend on the US states' willingness to accommodate the new crypto miners coming in, if it has its eyes set on unseating China as the undisputed biggest mining hub.

Details on the US projected to become the next major mining center, and more, are in the link below.


Kazakhstan bitcoin miner: US will make up 60% of the world’s computing power in 2 years


The vulnerability of Kazakhstan’s bitcoin mining industry was put on full display last week, when the country's internet shut down in the midst of anti-government protests, sparked by rising energy prices.


The world's second largest miner saw its hash rate or computing power that secures bitcoin, fall by double digits, in a dramatic pullback from the 18.1% it's estimated to contribute, according to Cambridge Center for Alternative Finance. 


The disruption marked a big setback for a market that has looked to capitalize on a mining ban in neighboring China. Its hash rate has increased more than 10% since China's ban last June.


“A lot of the older Chinese mining operations shifted to Kazakhstan,”John Warren, CEO of GEM Mining, a U.S.-based company reiterated. Before launching GEM’s mining operation in the U.S., Warren told Yahoo Finance he was approached about setting up operations in Kazakhstan with promoters touting its “cheap power” supply.


While cheap, the country's electrical grid hasn't been stable. In October, the Kazakhstan Electricity Grid Operating Company (KEGOC), which operates the national power grid, faced an energy supply crunch, citing both "a higher number of emergencies at power plants" as well as the "sharp increase in consumption of digital miners."


The limited power supply is likely to prompt another mining migration — this time, out West.


In an interview with Yahoo Finance, Xive Mining co-founder Dibar Bekbauov said that many of the country’s mining companies are increasingly looking to the U.S. as "one of the top priorities" for expansion, largely because of the availability of cheaper electricity. 


"I believe that U.S. will be the biggest mining hub in the world," he said. "More than 60% of the total hash rate will be in the United States within two years."


Such a move would not come cheap or easy, according to Colin Harper, head of content and research at Luxor, a bitcoin mining pool and software company.


The U.S. is now estimated to account for 35.4% of bitcoin’s hash rate. Harper told Yahoo Finance that because the country provides both abundant power and a more robust rule of law compared to other mining hotspots, competition for materials to build a mining facility or space to lease has compounded over the last year.


Adding to the hangover are China-based bitcoin miners that relocated to the U.S. and North American companies expanding. As a result, Kazakhstan-based miners thinking of moving to the U.S. could face a sizable hit to their bottom lines.


Sizable enough, especially if they just settled in the country after migrating from China that, according to Harper, some of them “might throw in the towel.”


'Green' in the U.S.A


The favorable condition the U.S. offers bitcoin miners is higher access to renewable energy sources.


Bitcoin mining’s energy intensity remains a hotly debated topic between climate activists, academics and miners themselves. Miners aren’t necessarily incentivized to seek renewable energy but it's become a major focus as the price of bitcoin has skyrocketed in 2020 and 2021.


According to an annual report from Luxor, “publicly traded miners (and those seeking to go public) will continue to “green" their operations by seeking renewables directly or purchasing carbon credits/offsets for two main reasons. First, companies will choose to do so voluntarily to “mollify criticism.” Second, ESG mandates from U.S. regulators will demand it.


Alex de Vries, founder of Digiconomist, an economics blog, is a staunch critic of the industry’s energy consumption. De Vries told Yahoo Finance in late August that “miners need cheap and stable power; and (obsolete) fossil fuels are simply better at delivering both.”


On Jan. 20, the U.S. House Energy and Commerce Committee will hold a hearing on the energy impacts of cryptocurrency, and bitcoin mining is expected to take a central focus.


In total Cambridge Center for Alternative Finance, clocks the industry as consuming 126 Terra watts hours (TWh) per year, which is more electricity than the Ukraine consumes and more than the electricity consumed by residential lighting and television in the U.S. However, these comparisons are not 1-to-1.



Edited by kyoukage01


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Yes, indeed, lawlessness in Kazakhstan led to the shutdown of the Internet and, accordingly, a general problem for miners. At the same time, this coincided with the expectation of an increase in the base interest rate of the USA Federal Reserve System. As a result, we see a "red" market. If the situation in Kazakhstan does not change, then miners will again move to another country.

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