Illegal or regular crypto mining can be seriously harmful to the environment.
In Venezuela, which has a history of illegal mining of gold, the government seized more than 100 miners. These miners were seized from an underground bitcoin mining operation in a single month. According to the media, the authorities tracked down the culprits because of the toll they paid on the power grid, National Electric System (NES).
Similar cases have also come to light in Malaysia, the UK, and several other countries. After the rush of crypto miners in Kazakhstan after China’s ban, the country also brought up rules and regulations to separate crypto miners from other power users.
According to Cambridge Bitcoin Electricity Consumption Index ( CBEC), this ban has resulted in the US becoming the top destination for bitcoin and crypto mining activities. Bitcoin miners in the US account for one-third of the cryptocurrency’s hash rate – the amount of computational power going into mining for Bitcoin.
Misuse of cheap electricity for crypto mining
Just like a surge in prices of precious metals is seen due to illegal mining, the same is visible in the case of cryptocurrencies. Higher prices attract several miners and due to this, there is a higher demand on the same supply. This leads to an increase in prices as the cycle continues. Moreover, the crypto mining industry runs on small margins. And the biggest factor in running such operations is the cost of electricity. Due to this reason, the countries with cheap rates of electricity attract many crypto miners.
For example – Venezuela introduced new regulations to make crypto mining legal in September this year. But, a month later, the Minister of Habitat and Housing reported that the government is banning crypto mining operations in low-income areas that have a power subsidy.
Also, Kazakhstan, another country having cheap electricity prices is separating illegal from permitted miners.
While the president, Kassym-Jomart Tokayev, is a positive outlook towards crypto mining, it was reported that the country’s national grid is rationing electricity. They are also targeting crypto mining farms because of their high consumption of power supply.
Demand and Supply
Iran is a country where the electricity supply lacks due to extreme temperatures in summers and winters. Crypto mining has only made this matter worse. Just like in Venezuela, crypto miners get permission for mining from Iran’s government.
But still, illegal mining operations continue to operate including the one in Tehran Stock Exchange.
Due to the toll on power grids, Iran had also banned crypto mining operations for four months. After a positive signal, the operations restarted in October. But the state electricity company still warns that illegal crypto mining is not over yet.
According to a statement by IRNA, it is expected that secret crypto mining will account for at least 10% of power outages in the winter season.
The US on crypto mining
With the US becoming a hub for crypto mining activities, Texas and Washington are in high demand. This is because of the low rates of electricity.
For instance, Texas faced a number of power outage crises earlier this year. More than 10 million people were left without any electricity in the middle of freezing temperatures. This was the reason for the death of at least 111 people.
In conclusion, the more people out there is mining bitcoin, the more difficult its algorithms are going to become to solve. This simply means that validation, transactions, or mining will result in the consumption of even more electricity. This is the reason why Ethereum is currently working on proof-of-stake (PoS), rather than proof-of-work (PoW).
- Authorities in Venezuela seized more than 100 miners. These miners were illegally operating a bitcoin mining farm.
- In Iran, the state’s power company has warned that illegal crypto mining operations will cause at least 10% of the power outages this winter.
- Despite many rules and regulations, illegal crypto mining continues in countries with cheap electricity rates. This is because the miners are looking to expand their profit margins.