Bitcoin network power slumps as Kazakhstan crackdown hits crypto miners
Reuters Reuters
Thursday January 06, 2022 11:48
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LONDON, Jan 6 (Reuters) - The global computing power of the bitcoin network has dropped sharply as the shutdown this week of Kazakhstan’s internet during a deadly uprising hit the country’s fast-growing cryptocurrency mining industry.
Kazakhstan became last year the world’s second-largest centre for bitcoin mining after the United States, according to the Cambridge Centre for Alternative Finance, after major hub China clamped down on crypto mining activity.
Russia sent paratroopers into Kazakhstan on Thursday to help put down the countrywide uprising after violence spread across the tightly controlled former Soviet state. Police said they had killed dozens of rioters in the main city Almaty, while state television said 13 members of the security forces had died.
The internet was on Wednesday shut down across the country in what monitoring site Netblocks called “a nation-scale internet blackout”.
The move would have likely prevented Kazakhstan-based miners from accessing the bitcoin network.
Bitcoin and other cryptocurrenices are created or “mined” by high-powered computers, usually at data centres in different parts of the world, which compete to solve complex mathematical puzzles in a highly energy-intensive process.
In August last year, the most recent data available, Kazakhstan accounted for 18% of the global “hashrate” - crypto lingo for the amount of computing power being used by computers hooked up to the bitcoin network.
In April, before China’s latest clampdown on bitcoin mining, the figure was just 8%.
The hashrate at major crypto mining pools - groups of miners in different locations that team up to produce bitcoin - including AntPool and F2Pool was on Thursday at 1215 GMT down around 14% from its level late on Tuesday, according to data from mining firm BTC.com. Neither pool immediately responded to a Reuters request for comment,
CRACKDOWN ON CRYPTO MINING
Yet a drop in hashrate isn’t necessarily supportive for the price of bitcoin.
Bitcoin fell below $43,000 on Thursday, testing multi-month lows after investor appetite for riskier assets fell as the U.S. Federal Reserve leant toward more aggressive policy action. read more
The more miners on the network, the greater the amount of computer power is needed to mine new bitcoin. The hashrate falls if miners drop off the network, in theory making it easier for the remaining miners to produce new coin.
Kazakhstan’s crypto mining farms are mostly powered by ageing coal plants which themselves - along with coal mines and whole towns built around them - are a headache for authorities as they seek to decarbonise the economy.
The Kazakh government said last year it planned to crack down first on unregistered “grey” miners who it estimates might be consuming twice as much power as the “white” or officially registered ones.
Its energy ministry said last year “grey” mining may be consuming up to 1.2 GWt of power, which together with “white” miners’ 600 MWt comes up to about 8% of Kazakhstan’s total generation capacity. read more
"The country (Kazakhstan) is the world’s second-largest miner of bitcoin after the United States. Bitcoin’s “hashrate” – the measure of computing power of machines plugged into its network – dropped by over 10% on Wednesday after Kazakhstan’s internet was shut off, according to crypto mining firm BTC.com."
Mining crypto currencies is as useful as playing video games, it’s just that a large number of 3rd party individuals are willing to pay you for that output.
Crypto currencies are ephemeral “assets” with values set by people who don’t understand that there is no lack of virtual currency, when anyone can start up another, such as “Let’s Go Brandon!” currency, in a wink.
Most people do not understand crypto mining. My son is a former successful crypto miner.
If mining is slowed down, that means fewer coins - and should mean, if the market understood, they are more valuable, not less.
And still, the crypto market is still manipulated and controlled - as much as crypto people say its advantage is that it cannot be.