Countries have successively regulated the mining industry. Does Bitcoin still have a future?

Just after the New Year, the currency circle ushered in a new round of attacks. Following many countries, Kosovo also took action against Bitcoin mines.

In September 2021, China took the lead in issuing a ban on comprehensively cleaning up Bitcoin mines. A large number of domestic mines were forced to go overseas to find a way out. Many mines focused on Nordic countries rich in green energy, and also Some are targeting Kazakhstan, Iran, Kosovo and other energy countries rich in coal and natural gas. Even the small Abkhazia has attracted many mine owners. By the fall of 2021, more than a quarter of all Bitcoins in the world have been produced in mines in Kazakhstan and Iran.

However, in recent months, some countries that once welcomed Bitcoin have also begun to expel miners in large numbers. There is no other reason. These Bitcoin mines are large power consumers, causing power shortages and even large-scale blackouts wherever they go. Even capital cities such as Tehran and Almaty are not immune. This is a slap in the face to those who believe that the Bitcoin industry can solve the pollution problem through renewable energy. Even the Nordic countries, which are extremely rich in renewable energy, have stated that if the Bitcoin mining industry is allowed to consume more and more wind and geothermal energy, the Nordic countries themselves may not be able to achieve their clean energy goals.

Recently, some places have been targeted by these "mining guerrillas". These places should be wary of this and seriously consider why these mines are not allowed in countries such as China, Kazakhstan, and Iran. For example, many mining farms have recently landed in Texas, which has become the hottest destination in the mining industry. Alex de Vries, a Dutch economist who runs a website called Digiconomist that tracks Bitcoin’s energy consumption, said: “The idea among Texans is that when there is new demand, they can fix it. The state’s power grid is fragile. This is the most ridiculous idea I have ever heard. Winter and summer are generally the times when power demand is greatest, and Bitcoin mining will only cause the power supply to be even more stretched, and the results will not be good.”

Now, more and more countries are taking action against the Bitcoin mining industry. This is especially true for some European countries such as Texas, New York, and Kentucky in the United States, as well as Germany and Ireland, which still welcome Bitcoin mining. A warning sign. Let’s take a look at which countries have recently made it clear that they will crack down on Bitcoin, starting with Kosovo, which raided Bitcoin on New Year’s Eve.

Kosovo cracks down on Bitcoin

In recent years, the cheap electricity produced by Kosovo’s thermal power plants has attracted many Bitcoin miners. Kosovo has a total population of 1.8 million. The Bitcoin mining industry is mainly concentrated in the northern region of Kosovo, and is especially popular among the young Serb population. Serbs are an opposition force in Kosovo. They do not recognize Kosovo as a country and refuse to pay electricity bills. In recent months, due to the shutdown of many local thermal power plants, the Kosovo authorities have had to import large amounts of expensive natural gas from neighboring European countries for power generation. Currently, Kosovo relies on foreign countries for approximately 40% of its energy. Kosovo has declared a 60-day state of emergency throughout the country, during which time power consumption in homes and businesses will be restricted. The ban on Bitcoin mining is Kosovo’s response to the energy crisis.

On December 31, 2021, the Kosovo authorities announced that “the production of virtual currencies is prohibited throughout the territory.” It is hoped that the excess electricity released after the Bitcoin ban will help Kosovo survive this cold winter. The message from Kosovo is clear: Energy is increasingly scarce around the world, and more and more countries are questioning the point of dedicating large amounts of energy to a currency that has little practical use.

Iran takes action again

In May 2021, major cities in Iran experienced power outages in turn. In order to relieve the pressure on power plants and reserve more electricity for households, the Iranian government announced a four-month suspension of Bitcoin mining. However, shortly after the short-term lifting of the ban, the Iranian government decided again to suspend Bitcoin mining on December 28, 2021 (three days before Kosovo decided to crack down on Bitcoin). According to official statistics, the electricity consumption of Bitcoin mining is roughly equivalent to 3% to 4% of Iran's national power generation. The ban will last until mid-March 2022, at which time the Iranian government may allow mining again in exchange for the foreign currency the Iranian government desperately needs. However, the biggest problem with Iran’s mining industry is that more than 60% of mining is carried out in illegal “black workshops”, and even some industrial-level mine owners are illegally “mining illegally”. Former Iranian President Hassan Rouhani once personally admitted that these "black workshops" are difficult to restrict and will continue to consume a large amount of household and commercial electricity. Now Iran's attitude towards Bitcoin has obviously turned negative, so it is still very doubtful whether Iran will continue to allow the mining industry to exist after the ban expires.

Kazakhstan’s attitude changes

In addition to the United States, Kazakhstan is also one of the gold destinations for mine owners leaving China. In the fall of 2021, Cambridge University found that Kazakhstan’s Bitcoin production had reached 22% of the global total.

It is estimated that after China issued a ban on Bitcoin, approximately 90,000 mining machines were transferred to Kazakhstan in just a few months to mine around the clock. In Almaty, the country's largest city, the size of the mining industry doubled from May to mid-November 2021. Generally speaking, electricity consumption in Kazakhstan will increase by an average of 1% to 2% per year. However, in 2021, due to the influx of a large number of mines from China and the soaring price of Bitcoin, which attracted a large number of new people to join the mining industry, Kazakhstan's national electricity consumption increased by 8% compared with the previous year.

Kazakhstan has huge oil reserves. At the beginning of 2021, the country also stated that it had a lot of spare power production capacity. But in just a few months, Bitcoin has brought the country’s power generation capacity back to prototype. By July 2021, power outages were occurring across the country. To this end, the government introduced new regulations in September to limit the electricity consumption of 50 registered mines. Two months later, the government enacted a law limiting all new mines to extremely low user capacity. Since then, Kazakhstan’s mining boom has begun to fade rapidly.

Iceland says "no" to miners

Iceland is rich in cheap geothermal energy, which has attracted a large number of miners to come to gold mining in recent years. Mining companies such as Hong Kong’s Genesis and Bitfury and Canada’s Hive all have huge operations in the island nation. But Iceland also has developed aluminum smelters and data center industries, which also have huge power needs. Now, Iceland is encountering an energy bottleneck problem, and Bitcoin mining is the main cause of Iceland’s energy shortage. The energy crisis has even forced the government to cut energy supplies to pillar industries. On December 7, 2021, Iceland’s national energy company Landsvirkjun announced that it would no longer accept power requests from new virtual currency mining farms.

Sweden wants to join the EU in banning Bitcoin

On November 12, 2021, two senior Swedish officials wrote an open letter to the country’s regulatory agencies and informed the EU (EU) makes a request. This move is likely to affect the "green Bitcoin" plan imagined by many people - for example, Elon Musk and Jack Dorsey both believe that clean energy can enable Bitcoin to take off its pollution hat. The letter was written by the director of Sweden’s Environmental Protection Agency and the head of the financial regulator, who called on Swedish leaders to halt all Bitcoin mining in the country. They also called on the 27 European Union governments to sign a Bitcoin mining ban. However, their reason is not the carbon footprint of Bitcoin mining, but because Bitcoin mining consumes a large amount of renewable energy, thus hindering the green transformation of traditional industries. Sweden generates more than 50% of its electricity from wind, solar and hydropower, and it is also one of the countries with the highest proportion of green energy in the world. It has also attracted many miners leaving China due to low electricity prices. The two officials pointed out that from April to August 2021, the electricity consumed by the country’s Bitcoin mining industry has increased several times.

The two officials believe that the electricity consumed by Bitcoin mining could have been used for projects that benefit people's livelihood, such as charging electric cars. They pointed out: "If Sweden allows the virtual currency mining industry, then our renewable energy may not be enough to achieve the climate transition we need." For example, promoting clean energy in industries such as steelmaking and battery manufacturing, etc. They believe that banning Bitcoin mining is crucial to achieving the climate goals of The Paris Agreement. They also cited some examples, saying that the electricity consumption of Sweden’s Bitcoin mining industry is equivalent to that of 200,000 households. “The electricity consumption of mining one Bitcoin is enough to allow a medium-sized electric car to travel 1.8 million kilometers.” Their conclusion is also straightforward—Bitcoin “is not a reasonable use of renewable energy.”

Sweden has banned it, and Norway is likely to follow suit

Just a few days after the Swedish official’s open letter was published, a senior Swedish official also joined their camp. Bjorn Arild Gram, the Swedish Minister of Local Government and Regional Development, said: “After looking at the plan proposed by the Swedish regulatory authorities, Norway is currently considering formulating relevant policies to deal with the challenges related to the virtual currency mining industry. "Gram also said that, like Sweden, Norway also needs a large amount of green energy to promote industries such as steelmaking and aluminum smelting away from fossil energy. As aluminum prices have soared in recent years, the demand for electricity from the aluminum smelting industry has also increased. Recently, Norway has also built some new cable projects, which will have the ability to export renewable electricity to other European countries in the future, which will bring a considerable amount of income to Norway. But Norway, on the other hand, has reduced energy production to levels only sufficient for domestic market use—and that excludes Bitcoin. It’s unclear whether Norway will follow Sweden’s lead in restricting Bitcoin, but whether the European Union can meet its extremely aggressive climate goals without allowing Bitcoin mining has become a hot topic.

The tiny land of Abkhazia

Abkhazia, located on the edge of the Black Sea, is a small country that split from Georgia in the mid-1990s. But it experienced the hazards of Bitcoin mining long before Iran and Kazakhstan.

Abkhazia has a population of only 250,000 people, but 625 Bitcoin mines have appeared here in 2020, and many mining machines are set up in people's kitchens and bedrooms. The rise of the Bitcoin mining industry increased local electricity consumption by about 20% in 2020. In mid-November 2020, local households and factories were hit by power outages. The government officially enacted a ban on Bitcoin mining at the end of that year. In order to prevent people from "hacking", the government also sent people to raid companies and houses, kicking in doors to pick locks, and moving machines to cut network cables, which temporarily put everyone in danger.

The more countries that shut out Bitcoin, the fewer will welcome it, and the greater the pressure on their power grids. Places such as Texas and Kentucky in the United States and the Canadian province of Alberta that still welcome Bitcoin mining will soon face this challenge. Maybe first you will hear that miners have established a partnership with local power companies, and the power companies have stated that they will increase the total power generation, and the mines will also be closed during peak power consumption hours to leave more power to households. and businesses.

Regarding this issue, the CEO of Iceland’s National Energy Company summed it up best: “No one will build a power plant specifically for Bitcoin. There are many uncertainties about its future.” Bitcoin Mining When merchants make the most money, that’s when their expensive mining machines are at full power. "So they have absolutely no incentive to shut down during peak power usage, or even do it at all."

Ultimately, the biggest problem with Bitcoin mining is that it increases the demand for energy, and this The world's energy is already insufficient.

(Fortune Chinese)

Translator: Park Sung-kyu