Central Asian nation plunged into chaos as violent protests sparked by rising fuel prices left dozens of dead and hundreds of injured. Amid the chaos, internet and telecommunications outages have been reported nationwide – and this is impacting local cryptocurrency mining operations, which are among the largest in the world.
Kazakhstan became a popular mining hub last year, after neighboring China cracked down on activity – restrictions Chinese officials said were needed 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 powerful computers that solve complex mathematical puzzles to create a new “block” on the blockchain. It requires significant computing power and electricity, and Kazakhstan, with its rich energy resources, has become an attractive alternative to China for miners.
Kazakhstan accounted for more than 18% of the Bitcoin network’s global hashrate in August of last year – the last month for which data was available, according to the Cambridge Center for Alternative Finance. It is just behind the United States. The hashrate refers to the total computing power used to mine the cryptocurrency, according to CoinDesk.
It is still unclear when internet services will be restored in Kazakhstan, making it difficult to know how much of an impact will be felt by crypto miners. According to Internet Monitor Netblocks, connectivity had been closed for 36 hours
from Friday morning.
Just hours after internet blackout, hashrate dropped 12%, tweeted Larry Cermak,
the vice president of research at The Block crypto website.
Investors are getting nervous. The price of a single Bitcoin fell to $ 42,000 on Friday, its lowest level since last September. The cryptocurrency was also under pressure after the US Federal Reserve signaled it could end the economic stimulus more aggressively than expected, making investors wary of riskier assets. .
Protests in Kazakhstan began following a surge in fuel prices. But there are also other long-standing issues behind the public fury, such as income inequality and economic hardship, which were all exacerbated during the coronavirus pandemic, Human Rights Watch said.
The uprising could cause miners to look elsewhere for their operations now, according to Anirudh Rastogi, founder of tech law firm Ikigai Law, which works with cryptocurrency exchanges in India.
“Ultimately it will be a question of miners finding the right hub for their activities,” he said. “They need a place with political stability and cheap electricity.”
Kazakhstan is already struggling to cope with huge demands on its energy grid due to increased crypto mining, the Financial Times reported in November, adding that power shortages in the country have resulted in the shutdown. of a major crypto mining farm.
According to Rastogi, such problems at major crypto hubs could force the industry to accelerate the adoption of more sustainable technology for mining, which uses much less electricity.