As Kazakhstan Comes From Conflict, Crypto Miners Lost

When Denis Rusinovich founded the cryptocurrency mining company Maveric Group in Kazakhstan in 2017, he thought he had hit the jackpot. Closer to China and Russia, the country had everything a Bitcoin miner could ask for: the winter, the ancient archeological and industrial forces where mining equipment could be established, in particular – cheap energy-destroying power plants. through the way cryptocurrency is made.

“This was a great opportunity,” says Rusinovich. When China banned cryptocurrency mining last night in June, most of the country’s miners – who at the time numbered between 60 and 70 percent of the Bitcoin network – made the same call and quickly moved to Kazakhstan, bringing to the country about 87,849. mining machinery, according to a Financial Times compare. In less than a year, the first problem was history: Miners now face an iceberg, a notorious riot, and Russian troops marching across the country. And getting out is not the way.

Last week, riots erupted in Kazakhstan as protests in the south of the country erupted over fuel prices that led to police crackdown, the removal of former President Nursultan Nazarbayev from his post as head of the security services, and the suspension of the internet. Russia-led troops working under the auspices of the CSTO, the Soviet Union’s military alliance, have been sent to the country. The suspension of crypto mining became apparent – the Bitcoin network has lost 12 percent of the hashrate so far. Jaran Mellerud, a cryptocurrency insights analyst at Arcane Research, estimates that the shutdown alone could cost Kazakh mines $ 7.2 million. For many miners, this was the most recent of the tragic conditions that disrupted their work for several months. Those who were tempted to relocate due to lower electricity prices found that their old electricity company was not prepared to deal with the sudden influx of miners, which led to increased energy use. The government said mining counts 8 percent of the world’s energy. In the face of power outages and power cuts, in October 2021 the government announced that it would begin distributing electricity to registered subscribers and releasing them if the grid became concerned.

This means that, well, the cryptocurrency mining fields cease to operate for a very long time, while most people turn on the heat due to the cold weather. “From 6pm to 11pm -[the power providers] sometimes it turns off the electricity on our mining farms, ”says Didar Bekbauov, founder of the Xive mining company. “That is quite a problem. Hopefully by the end of winter in March, we will be fine. “But sometimes, Rusinovich says,” there is no work “at all. That is not the only problem with regard to lost profits — Rusinovich claims that miners lost “millions of dollars” a month due to power cuts, and Bekbauov says his mines are about to collapse – but the weather presents an even greater risk at this time. extinguish because condensation freezes instantly on mines in the sub-zero period of Kazakhstan, which can damage equipment. “[If the machinery is] immediate closure, if cold, freezes, ”he says. In order to protect the cold goods during the protests, many miners decided to spend extra money on security, says Alan Dorjiyev, president of the Kazakhstan National Association of Blockchain and Data Centers Industry. He said: “I spoke to all the owners of the mines, and they said that they had added security to the mines — because the equipment was so expensive. This, he says, is despite the fact that most of the mining fields are in the north of the country where there is a lot of energy, far from the chaos.

Why is he still there? The answer is, they are cruel. All other major countries with cryptocurrency mines – including Russia, Canada, and the US – are grappling with a severe shortage of sufficient space. “It could not be worse — there is no place, no power,” says Alex Brammer, vice president of business development at the mining company Luxor Tech. “The biggest American mining companies that are being sold publicly have a serious problem that causes miners to shut down at any time in the next three to six months.”