Bitcoin has been going through difficult times lately – its price has hit anti-records again. Still, the most popular cryptocurrency and its “relatives” could face even bigger problems in the near future. After the complete ban on bitcoins in China, mining has gradually been banned by countries and regions to which numerous farms have migrated.
Initially, the northern countries of Kazakhstan, Iran, the Kosovo region and Abkhazia became a paradise for miners. But in the last few months, serious problems have arisen here too for those looking to mine cryptocurrencies. The work of the farms has led to blackouts around the world – from Tehran to Almaty, and local authorities want to do whatever it takes to prevent them.
Kosovo has become a haven for miners thanks to the relatively cheap electricity from local coal-fired power plants. However, the region now has to import natural gas and 40% of the electricity comes from abroad. On December 31, they announced a “ban on the production of cryptocurrencies in the entire area”. The situation is exacerbated by the fact that most miners choose not to pay for electricity via illegal connections.
Iranian cities were also hit by power outages in May. Because of the overloading of the power plants, Tehran has issued a four-month moratorium on Bitcoin mining and new restrictions from December 28th. According to official estimates, mining accounts for 3-4% of the total load on the electricity networks. The ban applies until mid-March.
Until recently, Kazakhstan was one of the most attractive places for miners. Last fall, a study by the University of Cambridge found the country accounted for 22% of all cryptocurrency mining – when farms migrated here from China, the country’s geographic proximity also had an impact.
Even so, power outages began in the country since mid-July. As a result, the authorities introduced a regime in September that partially restricts the electricity consumption of 50 registered miners. Two months later, a law came into force limiting the power consumption of each new miner and setting a cap on the total power consumption of the industry.
In Iceland, which is rich in cheap geothermal energy, miners compete with aluminum producers and data centers, and the country is already suffering from power outages. As a result, it has been announced since December 7th that requests to supply electricity to new mining farms will not be fulfilled.
On November 12th, representatives of local authorities in Sweden sent an open letter to local regulators and a request to EU authorities – the Swedes are calling for a ban on mining across the European Union. The main reason is that “green” energy is not being spent on real industries, which is preventing the “green revolution” in the EU. It is made clear that a medium-sized electric car can travel 1.8 million km on the electricity used to mine a bitcoin.
A few days after the Swedish manifesto, some Norwegian officials said that green energy was difficult to justify by mining bitcoins – it is needed for the production of aluminum and the steel industry.
After all, tiny Abkhazia with around 250,000 inhabitants had 625 mining operations in 2020. In the same year, bitcoin mining resulted in a 20% increase in energy consumption, and in mid-November 2020, power outages began in households and businesses across the country. The government has officially banned mining – the situation is compounded by the fact that law enforcement agencies are literally having to break into residents’ homes, as secret mini-farms are often right in kitchens and bedrooms.
Mining in the U.S. is also questionable – in high-energy states like Texas and Kentucky – during peak winter and summer, local power grids have shown they are not designed to mine cryptocurrencies, and farms likely won’t want to stop working during this time.
According to industry experts, the problem with Bitcoin and other cryptocurrencies is that their production increases energy consumption at a time when the world simply does not have enough energy to do so.