The Central Asian nation was thrown into chaos as violent protests sparked by rising fuel prices broke out dozens of dead and hundreds of wounded. As part of the chaos, internet and telecom outages have been reported across the country, and that is having an impact on local cryptocurrency mining operations, which are among the largest in the world.
Kazakhstan emerged as a popular mining hub last year after neighboring China cracked down on activity – restrictions that Chinese authorities said were necessary to protect the country’s efforts to cut carbon emissions.
Cryptocurrency mining is a complicated process by which new coins are put into circulation. Mining requires high-powered computers solving complex mathematical puzzles to create a new “block” in the blockchain. It requires a great deal of computing power and electricity, and Kazakhstan, with its rich energy resources, became an attractive alternative to China for miners.
Kazakhstan accounted for more than 18% of the global Bitcoin network hashrate in August last year, the latest month for which data was available, according to the Cambridge Center for Alternative Finance. That is second only to the United States. Hashrate refers to the total computational power that is used to mine cryptocurrencies, according to CoinDesk.
It is not yet clear when internet services will be restored in Kazakhstan, so it is difficult to know how deeply the impact will be felt by crypto miners. According to Internet monitor Netblocks, connectivity had been shut down for 36 hours
starting Friday morning.
Just hours after the internet blackout, the hashrate saw a 12% drop, he tweeted. Larry Cermak,
the vice president of research for encryption website The Block.
Investors get nervous. The price of a single Bitcoin fell to $ 42,000 on Friday, its lowest level since last September. The cryptocurrency has also come under pressure after the US Federal Reserve noted that it could undo economic stimulus more aggressively than expected, making investors wary of riskier assets.
The protests in Kazakhstan began over an increase in fuel prices. But there are also other long-standing problems behind the public anger, such as income inequality and economic hardship, which have been exacerbated during the coronavirus pandemic, according to Human Rights Watch.
This uprising could lead miners to look elsewhere for their operations, according to Anirudh Rastogi, founder of technology law firm Ikigai Law, which works with cryptocurrency exchanges in India.
“Eventually it will come down to miners finding the right center for their activities,” he said. “They need a place with political stability and cheap electricity.”
Kazakhstan has already been struggling to cope with the huge demands on its power grid due to the rise in crypto mining, the Financial Times reported in November, adding that power shortages in the country have led to the closure of a major mining farm. cryptographic.
According to Rastogi, these problems at major crypto hubs may force the industry to accelerate the adoption of more sustainable technology for mining, which consumes much less electricity.