The country's internet shut down last week in the midst of anti-government protests, the vulnerability of Kazakhstan's mining industry was put on full display last week, as a result of rising energy prices.
According to the Cambridge Center for Alternative Finance, the world's second largest miner saw its hash rate or computing power drop by double digits, in a dramatic pullback from the 18.1% it's estimated to contribute.
The market that was looking to capitalize on a mining ban in neighboring China was hit with a big setback. Since China's ban last June, its hash rate has increased by more than 10%.
John Warren, CEO of GEM Mining, a U.S.-based company, reiterated that a lot of the older Chinese mining operations moved to Kazakhstan. Before launching GEM's mining operation in the U.S. Warren told Yahoo Finance he was approached about setting up operations in Kazakhstan with promoters touting its cheap power supply.
The country's electrical grid isn't stable, as cheap as it is. In October, the Kazakhstan Electricity Grid Operating Company KEGOC, which operates the national power grid, faced an energy supply crunch citing both a higher number of emergencies at power plants as well as an increase in consumption of digital miners. The limited power supply is likely to prompt another mining migration out of the West.
In an interview with Yahoo Finance, Xive Mining co-founder Dibar Bekbauov said that many of the country s mining companies are looking to the U.S. as one of the top priorities for expansion because of the availability of cheaper electricity.
He believes that the U.S. will be the biggest mining hub in the world. In the next two years, more than 60% of the total hash rate will be in the United States. Colin Harper, head of content and research at Luxor, a mining pool and software company, said that such a move would not be easy or cheap.
The US is estimated to account for 35.4% of the hash rate of the digital currency. Harper told Yahoo Finance that competition for materials to build a mining facility or space to lease has risen over the last year because of the country's abundant power and a more robust rule of law compared to other mining hotspots.
China-based bitcoin miners that have moved to the U.S. and North American companies are some of the things that are adding to the hangover. As a result of the situation, Kazakhstan-based miners thinking of moving to the U.S. could face a sizable hit to their bottom lines.
Especially if they settled down in the country after migrating from China, some of them might throw in the towel, according to Harper. The US offers miners access to renewable energy sources because of the favorable condition of the U.S.
There is a debate about the energy intensity of Bitcoin mining between climate activists, academics and miners. Miners aren't necessarily incentivized to seek renewable energy, but it's become a major focus as the price of bitcoins has skyrocketed in 2020 and 2021.
According to an annual report from Luxor, public traded miners and those seeking to go public will continue to green their operations by seeking renewables directly or purchasing carbon credits offsets for two main reasons. Companies will choose to mollify criticism first by choosing to do so. ESG mandates from the U.S. regulators will demand it.
Alex de Vries, founder of Digiconomist, is a staunch critic of the industry's energy consumption. In late August, De Vries told Yahoo Finance that miners need cheap and stable power, and obsolete fossil fuels are simply better at delivering both. The U.S. House Energy and Commerce Committee will hold a hearing on the energy impacts of cryptocurrencies, and it's expected thatbitcoin mining will take a central focus.
In the total, the Cambridge Center for Alternative Finance consumes 126 Terra watts hours TWh per year, which is more electricity than the Ukraine consumes and more than the electricity consumed by residential lighting and television in the U.S. Akiko Fujita is an anchor and reporter for Yahoo Finance. Follow her on Twitter AkikoFujita.