Kazakhstan, one of the world’s leading Bitcoin (BTC) mining sites, is likely to lose its BTC hash rate leadership in the next hash rate distribution update, according to industry experts. sector.
According to the Cambridge Bitcoin Electricity Consumption Index (CBECI), Kazakhstan was home to over 18% of the global BTC hash rate in August 2021, after only the United States.
The rise in BTC mining power in Kazakhstan has been partly due to the mass exodus of Chinese miners triggered by China’s cryptocurrency crackdown. Before dropping to zero in August 2021, China’s BTC hash rate power was over 75% in 2019.
But despite many Chinese BTC mining giants like Canaan and BTC.com moving its operations to Kazakhstan in 2021, the country will likely end up losing its share of hash rate for many reasons, according to several industry executives. This would likely cause Kazakhstan to drop out of the top three BTC mining countries in the next CBECI update, which is expected to be released in March.
Bitcoin mining would eventually plummet in Kazakhstan, mostly due to unsustainable energy subsidies, as predicted by Phillip Ng, vice president of business development at data center firm Soluna Computing.
“We expect some mining activity to persist in Kazakhstan, but we don’t expect it to account for more than 10% to 15% of the global hash rate in the future. The reason is that electricity subsidies in Kazakhstan are not sustainable,” Ng told Cointelegraph. He cited January reports that authorities in Kazakhstan are considering removing electricity subsidies to stabilize the country’s finances.
Another reason Kazakhstan could lose its BTC mining leadership, according to Josh Fraser, co-founder of Origin Protocol, is the country’s dependence on the oil and gas industry.
“Countries that rely heavily on these energy sources for crypto mining could see lower hash rates due to price increases or state intervention,” Fraser told Cointelegraph. , citing ongoing geopolitical tensions and their impact on oil and gas prices.
“I would expect the US, Canada and Germany to increase their share of global hash rates somewhat due to [the] high availability of renewables and very high recent growth in hash rates. I would expect Russia, Kazakhstan and Iran to drop a bit,” Fraser said.
As previously reported, Kazakhstan experienced significant hash rate instability due to political unrest in early January, with the country’s presidential cabinet resigning and the government shutting down the internet for several days. According to David Lesperance, managing partner and tax advisor at Lesperance & Associates, political unrest, along with potential energy price hikes and new taxes on crypto mining, would certainly make Kazakhstan a less attractive jurisdiction for miners. .
“With Kazakhstan considering raising taxes on crypto miners, I think you’ll see miners who weren’t already scared off by the recent internet shutdown have yet another reason to look for a better long-term location. for their operations,” Lesperance told Cointelegraph. .
He added that crypto miners must find a jurisdiction that meets several criteria for long-term success, inducing a stable supply of green energy with long-term predictable prices, the rule of law to protect operations, a politically steady and others.
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Some Chinese crypto-mining giants are already showing signs of a potential reversal of expansion in Kazakhstan. BIT Mining, one of the largest BTC mining companies that relocated its operations from China to Kazakhstan in 2021, is abandoning some of its crypto-mining plans in Kazakhstan, according to a February 17 filing with the Securities and Exchange. United States Commission.
“The company has terminated its data center construction plan in Kazakhstan, announced in May 2021, due to the instability of the local power supply”, BIT Mining noted in the file. The company added that it is still operating BTC mining machines with a total hash rate capacity of 292.7 PH/s in the country.