The global computing power of the Bitcoin network fell sharply when the Kazakh internet shutdown this week during a deadly uprising hit the country’s fast-growing cryptocurrency mining industry.
Kazakhstan became the second largest bitcoin mining center after the US last year, after the great center of China cracked down on cryptocurrency mining, according to the Cambridge Center for Alternative Finance. Bitcoin price in India was Rs. 33.5 Lakhs as of 10:20 a.m. IST on Jan. 7th.
Russia sent paratroopers to Kazakhstan on Thursday to crush the nationwide uprising after violence spread across the tightly controlled former Soviet state. Police said they killed dozen of rioters in the capital, Almaty, while state television said 13 members of the security forces had died.
The internet was shut down across the country on Wednesday in what the monitoring site Netblocks called “a nationwide internet blackout”.
The move would likely have prevented Kazakh miners from accessing the Bitcoin network.
Bitcoin and other cryptocurrencies are created or “mined” by high-performance computers, usually in data centers in different parts of the world, that compete in a very energy-intensive process to solve complex mathematical puzzles.
Last August, according to the latest data available, Kazakhstan accounted for 18 percent of the world’s “hashrate” – crypto jargon for the amount of computing power used by computers connected to the Bitcoin network.
In April, before China’s recent crackdown on Bitcoin mining, it was just 8 percent.
The hashrate at large crypto mining pools – groups of miners in various locations who band together to produce Bitcoin – including AntPool and F2Pool, was about 14 percent from theirs on Thursday at 1215 GMT (5:45 p.m. IST) Levels down late Tuesday, according to data from mining company BTC.com. None of the pools immediately responded to a Reuters request for comment.
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However, a decrease in hashrate is not necessarily supportive of the price of Bitcoin.
Bitcoin fell below $ 43,000 (roughly Rs. 32 lakh) on Thursday, testing multi-month lows after investor appetite for riskier assets waned as the US Federal Reserve tended to adopt more aggressive policies.
The more miners there are in the network, the more computer power is required to mine new Bitcoin. The hashrate drops when miners leave the network, which theoretically makes it easier for the remaining miners to produce new coins.
Kazakhstan’s cryptocurrency mining farms are mostly powered by aging coal-fired power plants, which themselves – along with coal mines and entire cities built around them – are a headache for authorities as they attempt to decarbonize the economy.
The Kazakh government said last year it plans to take action first against unregistered “gray” miners who it estimates use twice as much electricity as “white” or officially registered miners.
The Ministry of Energy said last year that “gray” mining could use up to 1.2 GWt of electricity, which together with the 600 MWt of “white” miners makes up around 8 percent of Kazakhstan’s total generation capacity.
The country’s uprising began with protests in the west of the country against an increase in fuel prices on New Years Day.
© Thomson Reuters 2022
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