Kazakhstan lags far behind the US in terms of its share of the global bitcoin mining market, accounting for 18.1% of all cryptocurrency mining
As Kazakhstan plunges into chaos this week, an Internet outage has hit the world’s second-largest bitcoin mining hub, another blow to miners seeking a permanent and stable refuge.
Less than a year ago, China expelled all its cryptocurrency miners, many of whom sought refuge in neighboring Kazakhstan. But months after these crypto immigrants made their mark, protests over rising fuel prices have led to the worst social unrest the country has experienced in decades.
After ousting his government and calling on Russian paratroopers to help curb insurgent violence, Kazakh President Kashim Jomart Tokayev has ordered the country’s telecommunications service provider to suspend its Internet service. The shutdown kept about 15 percent of the world’s bitcoin mines offline, according to Kevin Zang of Foundry, a digital currency company that helped build more than $ 400 million worth of mining equipment in North America.
As Kazakh miner Didar Beckbau put it, “without the internet, there is no mining.”
Bitcoin fell below $ 43,000 for the first time since September on Thursday, falling more than 8%.
The internet service has since been restored in the country, but the whole episode reveals two important facts about the state of the bitcoin mining industry, according to CNBC. First, the bitcoin network is resilient, even when a significant portion of miners are unexpectedly offline. Second, the US may soon see a new influx of cryptocurrency miners wanting to avoid future vacations.
The question now is whether the US, which overshadowed China as the world’s largest bitcoin mining hub in 2021, has room to accept other miners.
Bitcoin mining in Kazakhstan
When Beijing ousted all bitcoin miners in May 2021, Kazakhstan seemed like a sensible destination. Aside from being right next door, the country is also a major energy producer.
Mining is the energy consuming computational process used to create new currencies and maintain a log of all transactions. Kazakhstan hosts coal mines that provide cheap and abundant energy, which is a major incentive for miners competing in a low-margin industry where their only variable cost is usually energy.
It also helps that the Kazakh government usually has a more relaxed attitude towards construction, which is good for miners who have to build physical facilities in the short term.
Kazakhstan lags far behind the United States in terms of its share of the global bitcoin mining market, accounting for 18.1% of all cryptocurrency mining, according to the Cambridge Alternative Finance Center.
But the Kazakh government has not been thrilled with the growing cryptocurrency industry.
For months, Kazakhstan lawmakers have been pushing for new rules to discourage mining, including a law introducing extra taxes for miners by 2022. Experts expect the move will significantly change the incentives for people who want to develop funds in Kazakhstan.
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