While the direct impact of China’s crackdown on cryptocurrency mining is known, no one can accurately predict the indirect and compounding impact Beijing’s decision to close its shores to crypto miners will have on the world at large. Most countries that are at the receiving end of these government regulations will have to make hard choices on several matters, especially on electricity. Unbeknownst to many in the crypto world, Kazakhstan is one of the countries racking their heads as to how, and if, mining Bitcoin would be a long-term endeavor in their nation’s vision. While bitcoin trading has been a widespread endeavor on different trading platforms all over the world, the responsibility for bitcoin mining has been a very controversial issue. While government regulations have been the culprit for bitcoin mining, the primary issue with bitcoin mining is the huge electricity demand from power miners. Before we see Kazakhstan and its electricity usage, let us look at bitcoin’sinvolvement in electricity and compare it with a few life instances.
Bitcoin’s long history with electricity
Mining Bitcoin has always been a fundamental part of the token’s success and continuity. Since Bitcoin operates as a proof-of-work consensus, it would require miners to approve transactions and validate blocks. Unlike most layer-2 or perhaps, new Layer-1 blockchains that use the proof-of-stake consensus, the Proof-of-work is known for rewarding miners, high electricity emissions, and huge carbon footprint. This has left a face-off between the power brokers of green energy andthe power miners of cryptocurrency.
Perhaps one might ask that how much power does Bitcoin uses? And if it is not a make-believe strategy to eradicate cryptocurrency. Well, the Proof-of-work consensus, where Bitcoin, Ethereum, Litecoin, and some of the earliest cryptocurrencies used is really energy-consuming.
Toputinperspective,
- Bitcoin uses5% of the world’s electricity.
- Bitcoin usesalmost seven times the electricity of Google.
- The electricity needed to power all American households for a year and all commercial buildings in the US for two months is what Bitcoin usesin one day.
While skeptics will come to support this claim, they fail to realize that the traditional banking system uses a little more than two times more electricity than its digital counterpart. So in clear terms, though bitcoin uses 114 Terawatts of electricity, it saves us more than 150 Terawatts if we use it instead of traditional banks.
Kazakhstan and Bitcoin Electricity usage.
After China put paid to crypto mining activities, most Bitcoin miners movedaway to the United States, Kazakhstan, and Russia. While this has helped the over 50% of mining activities in China get a foothold on their mining activities elsewhere, each of these recipient countries has an issue at hand which is forcing them to rethink their choices. Kazakhstan, an Asian country known for its constant electricity, has been under some intense scrutiny. They need to look inwards to see which of the citizens’ welfare or the $1 billion they are getting from bitcoin miners in their country before china placed the iron hand on crypto. Now, there is some unknown number of unregistered crypto miners in the country apart from the 87,000 new entrants of bitcoin rigsthat are registered, and this has been putting pressure on the existing electricity infrastructure in the country and the Kazakhstan bitcoin space.
In response to this problem, the president of Kazakhstan told bankers in a regular meeting that he believes they might have to go the unconventional way to increase the country’s power supply using nuclear energy. He explainedit is a dicey situation as the new and existing miners could leave if the electricity issues are not resolved; hence they will lose out on the opportunity to earn more taxes and the current taxes they earn. We have already seen Xive, one of the most popular bitcoin miningmarketplace, leaves the country, as the co-founder of the company attributed the move to the limited electricity supply they receive from the country. He called it a country risk, and he voiced out his displeasure on the ruined hopes, systems, and people.
While North Kazakhstanhas been holding up a bit better, the southern part of the country has been badly hit. There is little to suggest a change in the way things will change as the demand from these illegal miners is around 1500 megawatts and is poised to increase.
What can be done?
Apart from Kazakhstan, many other countries of the world have been hit by China’s choice to do away with cryptocurrencies and mining. Iran, another Asian country, had to ban bitcoin mining activities for four months as its power grid experienced a strain never before seen. Another popular choice for migration is Texas. This is due to Texas’ cheap electricity costs and its use of alternative energy. If this works, it is goingto be a big plus for the crypto mining space, as many more will follow suit in using clean energy to mine bitcoin. But looking at the nasty blackout Texas had earlier in the year, it is going to be a goose chase, thinking bitcoin cryptocurrency mining will not place extra load on the already pressured electricity grid. Cryptocurrencies are already too big to be scraped out of existence, and we cannot expect bitcoin cryptocurrency to follow Ethereum’s move to a proof-of-stake consensus. The only valid solution is to increase the electricity supply, which is why Kazakhstan’s move tonuclear powermakes a bit more sense.
The continuity of exchanges like Binance,Redot.com, and Coinbase, is secured because of the countries they are domiciled in. Still, other exchanges in crypto-threatened areas have to always be on their toes because of government regulatory risks.