Why it matters: A lot of people today only know Kazakhstan as the home of fictional character Borat, but it’s also one of the biggest Bitcoin-mining nations. The country’s importance in the world of crypto was illustrated this week when the overall BTC hashrate fell 13.4% after Kazakhstan’s internet was shut down amid widespread protests and violent clashes between protestors and authorities.
Research by the Cambridge Centre for Alternative Finance last year showed that Kazakhstan had become the second-largest center for Bitcoin mining after China clamped down hard on the industry. The country was responsible for 18% of all Bitcoin mining as of August—that figure stood at 8% before China started hammering down on crypto.
The scale of Kazakhstan Bitcoin mining operations was made apparent this week when, after protests over sharply rising fuel prices led to widespread unrest, “a nation-scale internet blackout” was put in place to disrupt protestors’ communications.
“I guess some geeks would say that in theory, you could mine without internet, but in practice, all the machines in Kazakhstan should be turned off because of the internet shutdown,” Jaran Mellerud, a researcher at Arcane Research, told CoinDesk.
With so many miners cut off from the Bitcoin network, the overall BTC hashrate fell from around 205,000 petahash per second to 177,330 petahash per second.
Btc.com estimates that Antpool, Poolin, F2Pool, and Binance Pool saw significant reductions in their hashrates around the same time as Kazakhstan’s internet was shut down. According to Mellerud, the pools are widely used by Kazakh miners.
Bitcoin’s price has also plunged since the Kazakhstan blackout, dropping from around $46,000 to $41,000.
It’s estimated that over 87,849 power-intensive mining rigs moved from China to Kazakhstan following the former’s crackdown, attracted by the former Soviet state’s low electricity prices. Reports state that demand for electricity in Kazakhstan increased around eight percent last year, a surge that caused power shortages, blackouts in six regions of the country since October, and shutdowns at three power plants.
Electrical grid operator KEGOC announced in 2021 that it would be rationing electricity to 50 registered crypto miners. They will also be the first disconnected in the event of grid failures.
Kazakh officials said much of the increased power usage is the fault of “gray miners,” unregistered crypto miners that operate from home or from factories. It’s estimated that they are behind the consumption of 1200 megawatts (MW) of power from the country’s power grid. Combined with “white” miners’ 600 MW of power usage, mining accounts for 8% of Kazakhstan’s total energy consumption. This year will see registered miners charged a compensation fee of 1 tenge (about $0.0023) to help with the situation and identify illegal miners.