As we enter 2022, situations in Kazakhstan have remained discouraging. According to local news agencies, since January 1, due to the rising price of liquefied natural gas, large violent protests broke out around the country. In the riots, dozens were killed and hundreds were injured. The situation is spinning out of control. on January 5, Internet communications throughout Kazakhstan were disrupted, and even telephone communications were cut off in large areas NetBlocks, a watchdog system, confirms a significant disruption to Internet service in Kazakhstan from January 5, 2022, progressing to a nationwide communications blackout.
Amidst the sudden riots in Kazakhstan, the world’s second largest Bitcoin mining center, BTC miners are more worried if the riots will threaten their personal safety and whether the Internet blackout will affect the current hashing power of the BTC network and the BTC price. According to Tokenview, after the Internet blackout, the BTC hashrate dropped by 16% on January 6, compared to the figure on January 2, and the BTC price plummeted to $42,436 on the same day, the lowest in nearly three months.
The BTC hashing power of the major mining pools also plunged on January 5. In particular, 1THash, the worst-hit mining pool, suffered a hashrate drop of over 80%, while other mining pools, such as Antpool, F2pool, Poolin, and ViaBTC, also saw a significant decrease in hashing power. The reason behind the drops is the massive shutdown of crypto farms in China, the world’s largest mining center at the time, at the end of May 2021. As such, Chinese miners had to power off, pack tons of mining rigs, and go abroad. As they tried to find the next resting place, these miners first noticed Kazakhstan, a country neighboring China with rich oil reserves, a stable power supply, and minimal default risk (please refer to the changes in regulations on crypto mining in Georgia and Kyrgyzstan).
It is reported that thousands of miners from China fled to Kazakhstan. According to the Cambridge Centre for Alternative Finance (CCAF)’s data on August 21, 2021, Kazakhstan accounts for 18.1% of the total hashing power in the world, ranking second globally, which increased by 10.73% compared with the figure on May 21, 2021.
The Financial Times reported that Kazakhstan is facing a huge electricity challenge due to the rise of crypto mining in the country. For instance, a large local crypto farm was closed due to power shortages. Plus, the riots have caused many casualties. For miners, power shortage and the lack of personal safety are the last things they want to see, which is why they may look for another region. Considering that these miners need a country with a stable political environment and cheap electricity prices, perhaps Russia is a good choice.
Luckily, recent news suggests that Kazakhstan has been able to restore a secure environment nationwide and that the situation is now under control. Meanwhile, the local law enforcement and armed forces are still working to restore order. According to the Data Center Industry and Blockchain Association of Kazakhstan (NABCD), the riots have not affected the licensed crypto mining companies, and the temporary decrease in the BTC hashrate was caused by the Internet outage. Moreover, NABCD suggested that the impact on the BTC price will only be temporary and it encouraged miners to keep operating in Kazakhstan.
It is noteworthy that according to the government, it will soon introduce new measures to curb the rising costs, including water, electricity, and gas. Although both the government and NABCD are optimistic about the prospect of crypto mining in Kazakhstan, in light of the current circumstances, it remains questionable whether the country could eventually keep the miners.