Starting this week, Bitcoin (BTC) mining companies operating on Uzbek soil, whether domestic or foreign, will be eligible for an energy tax exemption if they agree to use solar energy. This decision is in line with past statements by the government, which has been seeking to move towards green energy for several years.
Environmental and financial benefits for Uzbekistan
Following a presidential decree earlier this week, cryptocurrency mining companies operating in Uzbekistan, whether domestic or foreign, will be exempt from tax if they choose to run on solar energy.
This is therefore an incentive for mining companies to use clean energy, since otherwise they are forced to pay the price of electricity at double its value. Moreover, these prices are further increased during regional energy consumption peaks.
Uzbekistan, which is a country rich in raw materials, is self-sufficient in terms of energy, largely thanks to its natural gas and hydroelectricity production.
Although Uzbeks consume almost half the energy per capita than the rest of the world, the government has been developing green energy for several years, thanks in particular to solar panels.
Indeed, the region benefits from a high rate of sunshine throughout the year, so it is an interesting opportunity for the Central Asian country.
So, although cryptocurrency mining is already legal in Uzbekistan, companies wishing to benefit from this tax exemption will have to register with an organization created especially for the occasion.
The problems of crypto-currency mining
Proof-of-Work (PoW) is the method used by the Bitcoin (BTC) and Ethereum (ETH) networks to ensure their operation. However, it is a method that is often criticized as being particularly energy-intensive.
According to the Cambridge Bitcoin Electricity Consumption Index, a tool widely used to evaluate the energy consumption of the Bitcoin network, we can see that, for example, it consumes more energy than that used for gold mining.
A rather telling example is the energy consumption per country. Indeed, if the energy used to run the Bitcoin proof-of-work method were to be a country, that would place it in 24th place among all the countries in the world, which is absolutely considerable.
However, with this issue becoming more and more talked about, solutions are starting to emerge on their own. For example, using clean energy as Uzbekistan is proposing here, or using geothermal energy, as Nayib Bukele, the president of El Salvador, proposed.
In the case of the Ethereum blockchain, it is planned to solve the problem directly at the source: the network must evolve towards the Proof-of-Stake consensus, a method favored by blockchains since it combines both speed and very low energy consumption.
Finally, following the total ban on mining in China last year, many miners had to cross the borders to neighboring countries, notably Uzbekistan and its neighbor, Kazakhstan, where energy was more affordable. But now, even these countries are finding themselves forced to adapt to the demand for energy.
