Crypto miners at a loss as Kazakhstan plunges into chaos

When Denis Rusinovic He thought he had hit the jackpot, having founded cryptocurrency mining company Maveric Group in Kazakhstan in 2017. Next door to China and Russia, the country has everything a Bitcoin miner could ask for: a cold climate, a plethora of old warehouses and factories where mining equipment can be installed, and — above all — cheap energy to power the electricity-hungry process through It mints cryptocurrency.

“This is a great opportunity,” Rusinovich said.When China banned cryptocurrency mining overnight last June, many of the country’s miners, who made up 60 to 70 percent of the Bitcoin mining network at the time, made the same call and rushed to Kazakhstan, brought as many as 87,849 mining machines to the country, according to Financial Times estimate. Less than a year later, the initial buzz is history: miners now face machine freezes, popular unrest and Russian troops roaming the country. Leaving is not an option.

Photo: Tyler Weidman/Getty

Chaos swept Kazakhstan last week as protests in the south of the country sparked by soaring fuel prices led to a police crackdown, former President Nursultan Nazarbayev’s removal as Security Council chairman and an internet shutdown. The Russian-led military operates under orders from the Collective Security Treaty Organization, a military alliance of post-Soviet states, which was deployed to the country. The impact of the shutdown on crypto mining is clear – the Bitcoin network has lost 12% of its hashrate so far. Jaran Mellerud, an analyst at crypto-insight firm Arcane Research, estimates that the shutdown alone could cost Kazakh miners $7.2 million. For many miners, this is just the latest in a series of unfortunate circumstances that have plagued them for months. Those trying to relocate to the country because of low energy prices found its aging grid ill-prepared to handle the sudden influx of miners, causing a surge in energy consumption.Government says mining accounts for 8% of the country’s production capacityIn response to power outages and blackouts, the government announced in October 2021 that it would start distributing electricity supplies to registered miners and unplug them should the grid come under any stress.

This means, at best, that cryptocurrency mining farms stop working during peak hours, when ordinary people turn on their heating due to the harsh winter. “From 6 p.m. to 11 p.m.—[the power providers] There are times when the power to our mining farms is cut off,” said Didar Bekbauov, founder of mining hosting company Xive. “It’s definitely a problem. Hopefully when winter ends in March we’ll be fine. But in other cases, Rusinovich says, it’s not “surgery” at all. It’s not just a matter of lost revenue — Rusinovich says miners are losing “tens of millions of dollars” a month due to power outages, and Bekbauov says his mines Break-even is coming – but the weather presents an additional risk of downtime, as in the sub-zero climate of Kazakhstan, condensation on the miners will freeze instantly, potentially damaging the hardware.”[If the machinery is] Shut down immediately, if it’s cold, it will freeze solid,” he said. To protect the frozen stock during the protests, many miners decided to Spend money on extra security. “I’ve talked to all the mining owners and they say they’ve increased the safety of their mining facilities — because the equipment is very expensive,” he said. Although most mines have Located in the country’s energy-rich north, far from unrest, but that’s the truth.

Then why are they still there? The brutal answer is that they are stuck. All the other major countries with cryptocurrency mining infrastructure — including Russia, Canada, and the U.S. — are grappling with a severe shortage of adequate facilities. “It couldn’t have been worse — just no space, no capacity,” said Alex Brammer, vice president of business development at mining company Luxor Tech. “The largest publicly traded U.S. miners are having major issues keeping their miners plugged in anytime for the next three to six months.”

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