Bitcoin network power crumbles as crackdown in Kazakhstan hits crypto miners

LONDON – The global computing power of the bitcoin network has plummeted as this week’s Internet shutdown in Kazakhstan in a deadly uprising hit the country’s rapidly growing cryptocurrency mining industry.

Kazakhstan became the world’s second-largest bitcoin mining center after the United States last year, according to the Cambridge Center for Alternative Finance, after China’s main hub clamped down on crypto mining activity .

Russia sent paratroopers to Kazakhstan on Thursday to help quell the uprising across the country after violence spread in the tightly controlled former Soviet state. Police said they killed dozens of rioters in the main town of Almaty, while state television said 13 members of the security forces were dead.

The internet was shut down across the country on Wednesday in what monitoring site Netblocks called a “nationwide internet outage.”

The move would likely have prevented Kazakhstan-based miners from accessing the bitcoin network.

Bitcoin and other cryptocurrencies are created or ‘mined’ by powerful computers, usually in data centers located in different parts of the world, which compete to solve complex mathematical puzzles in a very power-intensive process.

As of August last year, according to the most recent data available, Kazakhstan accounted for 18% of the global “hashrate” – crypto jargon for the amount of computing power used by computers connected to the bitcoin network.

In April, before China’s latest crackdown on bitcoin mining, the figure was only 8%.

The hashrate in major crypto mining pools – groups of miners in different locations who team up to produce bitcoin – including AntPool and F2Pool was at 12:15 GMT on Thursday down about 14% from its peak. Tuesday’s level, according to data from mining company BTC. com. Neither pool immediately responded to a request for comment from Reuters.

Crackdown on crypto mining

A drop in hashrate is not necessarily favorable to the price of bitcoin.

Bitcoin fell below $ 43,000 on Thursday, testing multi-month lows after investor appetite for riskier assets fell as the US Federal Reserve leaned toward more aggressive policy action.

The more miners there are on the network, the more power the computer has to mine new bitcoins. The hashrate drops if the miners drop out of the network, which in theory makes it easier for the remaining miners to produce new parts.

Kazakhstan’s crypto mining farms are primarily powered by aging coal-fired power plants which themselves, along with the coal mines and entire towns built around them, are a headache for authorities seeking to decarbonize the economy.

The Kazakh government said last year that it plans to crack down first on unregistered “gray” minors who it says may consume twice as much electricity as “white” or officially registered minors.

Its Energy Department said last year that “gray” mining could consume up to 1.2 GWt of electricity, which, along with the 600 MWt of “white” miners, is about 8%. of the total production capacity of Kazakhstan.

The country’s uprising began with protests in the west of the country against rising fuel prices on New Year’s Day.

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