Bitcoin network power slumps as Kazakhstan crackdown hits crypto miners

Bitcoin network power slumps as Kazakhstan crackdown hits crypto miners

LONDON (REUTERS) - The global computing power of the Bitcoin network has dropped sharply as the shutdown this week of Kazakhstan's Internet during  hit the country's fast-growing cryptocurrency mining industry.

 

Kazakhstan last year became the  after the United States, according to the Cambridge Centre for Alternative Finance, after major hub China clamped down on crypto mining activity.

 

to help put down the countrywide uprising after violence spread across the tightly controlled former Soviet state. Police said they killed dozens of rioters in the main city Almaty, while state television said 13 members of the security forces 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, according to the most recent data available, Kazakhstan accounted for 18 per cent 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 per cent.

 

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 per cent from its level late on Tuesday, according to data from mining firm BTC.com. Neither pool immediately responded to a Reuters request for comment.

 

Yet a drop in hashrate is not necessarily supportive for the price of Bitcoin.

 

Bitcoin continued its drop on Friday (Jan 7), falling below US$42,000 to levels not seen since September, after investor appetite for riskier assets fell as the US Federal Reserve leaned towards faster interest rate hikes. The coin fell as much as 3.5 per cent to US$41,599 marking a tumble of about 40 per cent from its record near US$69,000 reached Nov 10. 

 

The more miners on the network, the greater the amount of computer power 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 the authorities as they seek to decarbonise the economy.

 

The Kazakh government said last year that 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 that "grey" mining may be consuming up to 1.2 GWt of power, which together with "white" miners' 600 MWt comes up to about 8 per cent of Kazakhstan's total generation capacity.

 

The country's uprising began with protests in the west of the country against a New Year's Day fuel price hike.




Auto, H. (2022, January 7). Bitcoin network power slumps as Kazakhstan crackdown hits crypto miners. The Straits Times. https://www.straitstimes.com/business/banking/bitcoin-network-power-slumps-as-kazakhstan-crackdown-hits-crypto-miners

  • Jan 09, 2022
  • Category: Articles
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