Bitcoin (BTC) hashrate has come to a screeching halt after a strong start to the year. Kazakhstan, the world’s second largest Bitcoin mining country, experienced an unprecedented Internet outage, freezing the entire mining industry for several hours.
Kazakhstan miners in the grip of a general Internet outage
The information was reported by Internet service provider NetBlocks. Kazakhstan is currently facing “a nationwide Internet outage after a day of mobile network disruptions.” According to their report, the strength of Internet network connectivity in the Central Asian country fell to 2% on Wednesday.
A comparison of the hashrates of the major mining pools indicates that the impact of this Internet network paralysis in the country has resulted in a 12% drop in the Bitcoin hashrate. The most affected are 1THash (-82%), OKExPool (-46.3%) and KuCoinPool (-22.7%). Indeed, Kazakhstan is the second most powerful country in terms of Bitcoin (BTC) mining and captures over 18% of the total hashrate alone.
The Internet outage in Kazakhstan comes as the country is going through a complicated economic and social crisis. Following violent protests against the sharp rise in fuel prices, the previous Kazakh government was dissolved on Wednesday.
According to some specialists, Kazakhtelecom, the biggest telecommunication company in Kazakhstan, voluntarily cut the Internet in the whole country to “severely limit the media coverage of the anti-government demonstrations which are intensifying”. An initiative that was not enough to contain these movements, which have resumed in earnest today.
Kazakhstan benefits from the flight of Chinese miners
That said, this recent drop in hashrate has nothing to do with the one that hit Bitcoin last May, following China’s intensified crackdown on cryptocurrencies. The business administration department of the People’s Bank of China (PBoC) had proceeded to shut down several companies accused of facilitating cryptocurrency transactions.
Moreover, exchange platforms such as Huobi or Okex were the first to sniff out the scam, suspending almost all their services to users residing in China. Of course, minors were not spared. On the contrary, they were asked to stop their activities, while the Bitcoin mining industry was often considered too dependent on the Middle Kingdom country.
Despite this, Kazakhstan has found itself the host of this exodus of miners from the neighboring country. While the Bitcoin hashrate from China completely died out in June 2021, the hashrate of miners from Kazakhstan has almost doubled from 10.6 Eh/s to 21.9 Eh/s in two months.
There are several reasons for this trend. Obviously, the proximity of the two countries, but also the very welcoming policy of the Kazakh government towards this new industry, now recognized by legislation. Moreover, in September 2020, an investment plan of 700 million dollars was launched by Kazakhstan to boost the sector. Finally, and most importantly, the country’s electricity prices are the lowest in the world, at $0.036 per kWh.
Too much development for the country?
Since the beginning of the year, Kazakhstan has registered 146 companies involved in cryptocurrency mining. The new registry includes 53 companies that are currently mining, 82 that are considering mining and 11 other infrastructure providers. These providers are mostly data centers like Enegix, one of the largest such centers in the world.
Now the second-largest source of bitcoin hashrate in the world – after the U.S. and ahead of Russia – Kazakhstan has seen a surge in cryptocurrency mining during 2021. That said, as soon as miners moved in, the country saw its resources and facilities put under strain.
Indeed, faced with too much demand, and in order not to handicap the rest of the country, the government had to take strict measures. Since the beginning of the year, miners have been subject to an additional tax of 1 tenge per kilowatt hour of electricity, or 0.002 euros at the time of writing.
Amidst these problems, some miners have already chosen to leave Kazakhstan. BitFuFu, one of the largest, has declared that it is abandoning its machines in the country and turning to the United States, following inconsistent rules and power cuts. Still, we’ll have to keep an eye on the situation, and the impact it will have on the Bitcoin mining business.
