Chinese bitcoin mining has almost entirely ceased since the government restricted cryptocurrency use in May, meaning much of this activity has moved elsewhere – including to Kazakhstan, where fossil fuels, including coal, produce more than 90 per cent of the nation’s electricity supply.
Bitcoin relies on a network of computers known as miners that solve mathematical problems to secure the currency, consuming vast amounts of electricity in the process. Data from the Cambridge Centre for Alternative Finance (CCAF) shows that the previously rapid investment in new bitcoin mining plants stopped in China from September 2019 to April 2021 in anticipation of the ban.
China’s share of global bitcoin mining power declined from 75.5 per cent to 46 per cent over the period, while the existing miners remained static in size and waited for news. During the same period the global mining share of Kazakhstan rose from just 1.4 per cent to 8.2 per cent, catapulting it to third place after the US.
Bitcoin has faced growing criticism for its impact on climate change and a rise in Kazakhstan mining is likely to further that narrative as the country is heavily reliant on fossil fuels. Kazakhstan was the world’s ninth largest producer of coal in 2018, according to International Energy Agency data. In that same year, 70 per cent of its electricity was derived from coal power, and 20 per cent from natural gas. Renewables made up only 1.4 per cent of the country’s energy supply.
State energy supplier KEGOC didn’t respond to a request for interview about how it plans to ramp up supply to meet demand, though in 2013 the country set a goal of producing 50 per cent of its energy from sources other than coal or oil, including gas, nuclear and renewable energy, by 2050.
The CCAF data shows that US mining also grew over the same period, from 4.1 per cent of global share to 16.8 per cent, putting it in second place. Only 11 per cent of the US electricity supply is from renewable sources. The analysis is collated from data supplied by four mining pools that together represent 37 per cent of total global mining.
The Chinese ban has shaken up the entire sector, with CCAF data showing that more than half of miners worldwide have stopped operating. The entire network was estimated to be using 132 terawatt-hours of energy in mid May but this plummeted to 59 TWh in early July.
“It’s quite safe to say that there is very little activity left in China,” says Michel Rauchs at the CCAF. “Now the big question is where is that actually going.”
Peter Wall at mining company Argo says that he is seeing a “gold rush” of Chinese miners looking to move their redundant equipment and set up in the US, and seeking renewable energy sources.
“They left China in part because they were associated with coal and dirty power. They’re aware that the most long term sustainable form of mining is to use renewable power,” he says. “If you’re a miner, the thing that keeps you up at night, the thing that gives you nightmares, is having machines sitting in storage not mining.”
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