Over the years, bitcoin has changed the economy of many countries, perhaps none more than Kazakhstan. A few years ago, bitcoin miners were betting on the central Asian nation as the perfect place to operate a bitcoin mining operation. The country was among the top three nations for bitcoin mining globally, and this seemed likely to continue. Many factors made Kazakhstan a safe bet for a bitcoin operation to set up, including the cold winter climate, low energy costs to power mining farms, and plenty of available real estate that investors could scoop up at a low price to get set up.
However, recent developments in Kazakhstan have made it less than optimal for bitcoin mining operations, and many of the processes in the country are less productive than before. These most recent changes are primarily political, as protests in the country have led to the deployment of Russian troops to keep the peace and protect citizens. At the beginning of 2021, political strife caused the Internet in the nation to be shut down. This shut down ran intermittently over six days for a total of 100 hours, and estimates show that during this period, miners lost an equivalent of twenty million dollars.
But this is simply the latest problem for miners who came to the country looking to make a quick fortune and invested plenty into creating a mining operation here. Over the past few years, many crypto miners who had to leave other countries for various reasons chose to set up in Kazakhstan, thinking it would be an ideal business move. In particular, actions taken in China to drive out crypto miners drove a lot of miners to move over to Kazakhstan because it was an easy, affordable move. While some nations, like the United States, enforce a hefty tariff on items coming in from China, Kazakhstan did not at this time. The influx of crypto miners into the country caused a level of strain on the power grid that leaders did not anticipate. This caused blackouts in extreme cases because crypto miners use a notoriously large amount of energy to do their work. Suddenly regular citizens were having trouble accessing the power they needed to cook meals, take hot showers, warm their homes, and live an everyday, comfortable life. With the winter temperatures in this country dropping to extreme lows, the government took action to help citizens access power back in October 2021. The government now rations the amount of power to crypto mining farms, especially during peak use times when citizens are likely to need it. When a cold weather snap hits, this can mean crypto miners have no electricity through the evening and night hours, when people need to heat their homes the most. With freezing temperatures, the norm in the winter, mining equipment can freeze solid when the power to the facility is cut.
As the situation grows worse, some miners are contemplating moving out of the country and setting up elsewhere, but this is not as perfect a solution as it initially seems. Not only do they need to find a location within a country that has stable power and internet service, but crypto mining also requires space in a facility that is equipped with the proper infrastructure. In countries like the United States, Canada, or the United Kingdom, setting up a crypto mining operation can take two years. In addition, there may be a need for new equipment to meet the standards of the new country where the facility will be located. Machines that can be moved without damage are subject to an export tax from the government of Kazakhstan and a possible import tax from the nation they are arriving in. Deciding what to do is causing these crypto mining operations a lot of stress and anxiety, as there is no easy path forward.
Only time will tell how long these issues will last, whether Kazakhstan will remain a hub for crypto mining, or if miners will have to pack up and leave to keep working.