Kazakhstan attracts bitcoin miners and that’s not good news

China’s restrictions on bitcoin have pushed miners to neighboring Kazakhstan. The country was catapulted to third place in global mining in April 2021. Bad news from an environmental point of view.

The geography of bitcoin has changed a lot in recent months. A study by the Center for Alternative Finance in Cambridge (in English, CCAF) reveals that China’s role in bitcoin mining has declined significantly, as Beijing toughened its tone on the subject. China’s share rose from 75.5% to 46% of global mining between September 2019 and April 2021. One of the countries that benefited the most from this shift is Kazakhstan. The CCAF shows that the country’s share of global mining has almost increased sixfold: it went from 1.4% to 8.2% during this period.

This spectacular increase has ” catapulted the country to third place in global mining Says the Cambridge Center for Alternative Finance. This is not very good news. Bitcoin mining does indeed consume a lot of energy. It is linked to the design of its blockchain based on proof of work: to validate transactions by registering them on new blocks, the miners’ machines must perform complex calculations. All of this consumes a lot of electricity. The origin of this is therefore very important. However, Kazakhstan’s electricity is extremely carbonaceous: 90% comes from fossil fuels, especially coal. Bitcoin mining in the country will therefore generate a lot of greenhouse gas emissions.

Electricity production in Kazakhstan emits a lot of CO2. // Source: Alexander Serzhantov / Unsplash

Kazakhstan and the United States attract bitcoin miners

It is important to note that the CCAF data only covers the period from September 2019 to April 2021. Even if a part of the miners had noticed the turnaround in Beijing, and began to move their activities as a result, another part continued to mine in China. It wasn’t until mid-June 2021 that China actually put a stop to mining, ordering electricity providers to stop supplying bitcoin farms. Since April 2021, many other farms have therefore ceased their activities in China and, for some of them, have relocated them elsewhere. It will be interesting to see, on the next CCAF publication, whether the numbers in Kazakhstan have increased even further since then, or whether minors have favored other destinations.

Between September 2019 and April 2021, the United States saw its share of hashrate total (the amount of calculations miners can perform per second in the world) increased from 4.1% to 16.8%. It is certain that this figure has increased further since then. States like Texas are trying to lure miners to their soil with cryptocurrency-friendly regulations. The fact that they are investing in renewable energies may also be of interest to mining companies who would be concerned about criticism of their carbon footprint.

The difficulty of mining bitcoin has dropped significantly

Note that the restrictions put in place by China against bitcoin miners have not only led to a complete change in the geography of the sector: they have also led to a significant decrease in the difficulty of mining. The designer of bitcoin, Satoshi Nakamoto, has, in fact, made sure that the validation rate of blocks on the blockchain remains stable (every 10 minutes).

To maintain an equal pace when the mining capacity increases (if the number of miners increases or if they install new machines), the difficulty of mining bitcoin is therefore increased. Conversely, when the mining capacity decreases, the difficulty of the calculations is reduced. China’s measures led to a dramatic drop (-54%) in hashrate. The system invented by the mysterious Satoshi Nakamoto has however held its own and the difficulty of mining bitcoin has been readjusted as planned. It fell by 28% at the beginning of July.

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