Bitcoin network power slumps as Kazakhstan crackdown hits crypto miners

  • Bitcoin’s “hashrate” falls after internet shutdown in Kazakhstan
  • The country accounted for 18% of the world’s bitcoin production power in August
  • Participation has grown dramatically after China’s crackdown
  • Kazakhstan cut the internet after deadly protests

LONDON, Jan.6 (Reuters) – The global computing power of the bitcoin network has been drastically reduced as this week’s internet shutdown in Kazakhstan during a deadly uprising hit the country’s fast-growing cryptocurrency mining industry.

Kazakhstan last year became the world’s second-largest center for bitcoin mining after the United States, according to the Cambridge Center for Alternative Finance, after China’s main center cracked down on mining activity. of cryptocurrencies.

Russia sent paratroopers to Kazakhstan on Thursday to help quell the uprising across the country after violence spread across the tightly controlled former Soviet state. Police said they had killed dozens of rioters in the main city of Almaty, while state television said 13 members of the security forces had been killed.

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The internet was shut down nationwide on Wednesday in what monitoring site Netblocks called “a nationwide internet blackout.”

The move would likely have prevented Kazakhstan-based miners from accessing the bitcoin network.

Bitcoin and other cryptocurrencies are created or “mined” by high-powered computers, usually in data centers in different parts of the world, competing to solve complex mathematical puzzles in an energy-intensive process.

In August of last year, according to the most recent data available, Kazakhstan accounted for 18% of the global “hashrate” – crypto jargon for the amount of computing power used by computers connected to the bitcoin network.

In April, before China’s latest crackdown on bitcoin mining, the figure was just 8%.

The hashrate in the major cryptocurrency mining pools (pools of miners in different locations coming together to produce bitcoins), including AntPool and F2Pool, dropped at 1215 GMT on Thursday by around 14% from its level on Tuesday night. , according to data from the mining company BTC. com. Neither group immediately responded to a request for comment from Reuters.

CRYPT MINING REPRESENTATION

However, a drop in the hash rate does not necessarily support the price of bitcoin.

Bitcoin fell below $ 43,000 on Thursday, testing multi-month lows after investor appetite for riskier assets fell as the US Federal Reserve leaned toward more aggressive political action. read more

The more miners there are on the network, the greater the amount of computer power it takes to mine new bitcoins. The hash rate drops if miners leave the network, which in theory makes it easier for the remaining miners to produce new coins.

Kazakhstan’s crypto mining farms are primarily powered by aging coal plants which, along with the coal mines and entire towns built around them, are a headache for authorities seeking to decarbonize the economy.

Kazakhstan’s government said last year that it planned to crack down on unregistered “gray” miners who it estimates could be consuming twice as much energy as officially registered or “white” miners.

His energy ministry said last year that “gray” mining could consume up to 1.2 GWt of energy, which together with 600 MWt from “white” miners represents about 8% of Kazakhstan’s total generating capacity. . read more

The country’s uprising began with protests in the west of the country against rising fuel prices on New Year’s Day.

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Reporting by Tom Wilson; Edited by Emelia Sithole-Matarise

Our Standards: The Thomson Reuters Trust Principles.

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