Global bitcoin hash rate drops after Kazakhstan cut off internet in the country

Why is it important: Many people today only know Kazakhstan as the home of the fictional character Borat, but it is also one of the largest Bitcoin producing countries. The country’s importance in the crypto world was demonstrated this week when the overall BTC hash rate fell 13.4% after the internet in Kazakhstan was cut off amid massive protests and violent clashes between protesters and authorities.

A study by the Cambridge Center for Alternative Finance last year found Kazakhstan emerged as the second largest Bitcoin mining center after China severely restricted the industry. The country accounted for 18% of all Bitcoin mining as of August, a figure that stood at 8% before China began suppressing cryptocurrency.

The scale of bitcoin mining in Kazakhstan became apparent this week when, following protests over soaring fuel prices that led to widespread unrest, a “nationwide internet shutdown” was announced to disrupt protesters’ communication.

“I think some geeks will say that in theory you can mine without internet, but in practice all machines in Kazakhstan should be shut down due to internet outages,” Jaran Mellerud, a researcher at Arcane Research, told CoinDesk.

With so many miners disconnected from the Bitcoin network, the total BTC hash rate dropped from 205,000 petahesh per second to 177,330 petahesh per second.

According to estimates, the hashrate of Antpool, Poolin, F2Pool and Binance Pool dropped significantly around the same time the internet was shut down in Kazakhstan. According to Mellerud, pools are widely used by Kazakhstani miners.

Bitcoin price also fell after a power outage in Kazakhstan, dropping from $ 46,000 to $ 41,000.

It is estimated that more than 87,849 energy-intensive mining installations have been relocated from China to Kazakhstan following the defeat of the former, attracted by low electricity prices in the former Soviet state. The reports say that electricity demand in Kazakhstan increased by about eight percent last year, resulting in power outages, power outages in six regions of the country since October and shutdowns at three power plants.

Electricity operator KEGOC announced in 2021 that it will ration electricity to 50 registered crypto miners. They will also be the first to disconnect in case of network outages.

Kazakh officials have said that gray miners, unregistered cryptominers who work from home or in factories, are largely to blame for the increase in energy consumption. They are estimated to be responsible for the consumption of 1,200 megawatts (MW) of electricity from the country’s grid. Combined with the 600 MW power consumption by white miners, mining accounts for 8% of the total energy consumption in Kazakhstan. This year, registered miners are charged a compensation fee of 1 tenge (about $ 0.0023) to help with the situation and identify illegal miners.

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