Kazakhstan almost disappeared from the bitcoin mining map this Wednesday (5th), after President Kassim-Jomar Tokayev ordered the country’s internet and cell phones to be cut, which is convulsing in protests against fuel prices.
The nation is the second largest miner of currency in the world, behind only the United States – a position achieved after absorbing part of what was done in China, which in September 2021 declared any activity with cryptocurrencies in its territory to be illegal.
The action disrupted the cryptocurrency market.
According to the Cambridge University Bitcoin Market Electricity Consumption Index, 18% of the global energy used for mining the currency was used by Kazakhstan.
Down since Monday (3), the currency fell by 5.21% on Wednesday. It follows a declining path of 0.93% this Thursday, worth just over R$248,000.
Ethereum, less known than bitcoin but widely traded among enthusiasts, also suffered from the conflict in Kazakhstan. In the fourth, the low was of 6.51%, and in this fifth fell another 2.7 percentage points.
“No internet, no mining,” said Didar Bekbau, co-founder of mining company Xive, which operates in the territory of the former Soviet republic, on his Twitter account.
According to Axel Blikstad, partner of the manager specializing in cryptocurrencies BLP Asset, the intense volatility that bitcoin has faced in recent days, although it stems in part from the uncertainties about Kazakhstan, is even more due, in the view of the manager of BLP Asset, to the signals. by the Federal Reserve on monetary policy for the largest global economy in 2022, which had a strong impact on risky assets across the board.
He assesses that, although in the short term the event in Kazakhstan may contribute to bringing some volatility to cryptocurrencies, from a more medium and long term perspective, the interruption of operations in the country may end up contributing to the prices of digital assets.
This is because, if the situation continues for some time in the Asian country, the trend, points out the expert, is that miners, who have already made a mass migration in recent times after the restrictive measures imposed by China, will again seek new countries to establish their operations.
“And if some of these miners migrate to the United States, where most of them have already gone after China’s sanctions, it will be great news, as the focus there is more on renewable energy, such as solar,” says Blikstad, adding that in El Salvador, where bitcoin was officially adopted as the official currency from September 2021, mining for the cryptocurrency has already started to be done using geothermal energy, obtained through the heat of volcanoes.
​Bitcoin mining is the process of validating, through complex mathematical problems, cryptocurrency transactions. This is done through the blockchain, a kind of file that records currency movements and cannot be changed. To defraud it, it would be necessary to validate all the previous blocks of information, which is not feasible.
The interest is in the reward: at the end of this process, new cryptocurrency units are placed on the market and given to the miner. To compensate for the energy expenditure, this action needs to be done by very high-capacity computers, which has generated a race to install mining farms in countries where energy is cheap.
The term mining comes from an analogy with gold, as bitcoin is also finite — 21 million coins will be issued in all.
In this dispute, whoever has the most computing power mines more. The more powerful the machine, the more problems it can solve and the more rewards it generates.
Since the end of last year, when there was a mining boom in the country, the government has been at war with cryptocurrency entrepreneurs.
According to a report by the Financial Times, cities in six regions of the country faced blackouts in the middle of the country’s winter due to the overload on the energy system caused by mining. By the end of November, energy demand had already risen 8% since the beginning of the year. After the shutdown of three plants, the local operator said it would ration energy to mining companies.
According to data from the British newspaper, at least 87,849 mining machines operating in the country in November last year originated in China.
The grievance of citizens on the streets of Kazakhstan started with the price of fuel, but the wave of protests spiraled out of control.
On Wednesday, protesters attacked public buildings and protested in Kazakhstan’s major cities, including the largest, Almati, and the capital, Nursultan (formerly Astana). The president’s official residence was invaded and then vacated.
The country is in a state of emergency, and President Tokayev went on TV to announce that he had requested military assistance from the Russian-led Collective Security Treaty Organization. In the morning of this Thursday, the power had already sent troops of paratroopers to suppress the uprising.
Police said they had killed dozens of mutineers in Almati, and the country’s state television said 13 members of the security forces had died.
(With Reuters)
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