Borat’s Home Country Kazakhstan emerges as the New Bitcoin Mining Hotspot, as electricity rates are among the cheapest in
Kazakhstan is a fascinating country, and if you consider what’s going on in its history, it’s not too surprising that it has emerged as the new hotspot for bitcoin mining. Large swathes of the country are under the influence of uranium reserves, and the government is now encouraging small-scale miners to take advantage of the abundance of cheap energy. As a result, Kazakhstan is now home to almost half of the planet’s bitcoin mining operations, and that number is rapidly growing.
For a lot of Bitcoin miners, the expense of running a mining operation is a major factor in whether they choose to mine Bitcoin or another altcoin. One of the reasons for this is the cost of electricity. For most of the major cities in countries that host major Bitcoin mining operations, electricity is relatively cheap. While it is true that you may still end up paying more for a kilowatt of electricity than you would if you were living in a place like Denmark or Sweden, it is possible to find countries where the price is less than 1/3 of what you would pay in places like the US.
China has always accounted for the lion’s share of the world’s bitcoin mining, but recent repression against miners is reducing that dominance and forcing miners to defect to other countries that offer cheap electricity and support for domestic bitcoin mining. One of those Third World countries that has gone unnoticed all this time is Kazakhstan. Before China imposed a strict ban and miners moved abroad, Kazakhstan accounted for more than 6% of the world’s Bitcoin mining hash capacity. Most mining companies find that moving to Kazakhstan is the best way to reduce costs and find cheap land to set up mining operations.
We already see leading mining companies making profitable investments in local mining partners in Kazakhstan, enabling the smooth delivery of thousands of mining machines from China. With the growing interest of the global cryptocurrency market and bitcoin visionaries, Kazakhstan has gained a well-deserved international presence and is now an ideal location for mining companies to locate. In this article, we will discuss the different aspects of mining cryptocurrencies in Kazakhstan and take a closer look at the companies that are taking advantage of this opportunity.
History of crypto-currency mining in Kazakhstan
Above all, Kazakhstan is the world’s largest producer of cryptocurrencies. In 2019, it ranked sixth in terms of hashrate and is now the fourth largest mining company in the world. It may seem that today’s companies are very interested in providing significant funding and resources to miners in Kazakhstan, but back then the landscape was very different for mining cryptocurrency.
From a total ban on cryptocurrencies to legalizing mining, the Kazakh government has taken many turns before fully supporting the adoption of digital currencies.
In 2018, the leadership of the National Bank of Kazakhstan wanted to ban any form of digital currency and did not want citizens to participate in this form of monetary exchange. A few weeks later, however, the same group of officials spoke out in favor of global participation in cryptocurrencies.
The government introduced this new market system for cryptocurrencies in 2017, but never highlighted any guidelines indicating further development.
One of the main catalysts for blockchain solutions was the IACF working group, which included Deloitte, Waves, Juscutum and Kesarev Consulting. They are focused on creating a new environment in Kazakhstan to attract more foreign investment in the blockchain and cryptocurrency space. That’s exactly what happened.
The Kazakh government has introduced a regulatory approach and developed a roadmap to strengthen the country’s position in the global crypto-currency market. Investments are starting to flow into the country. According to a report by China’s Ministry of Commerce, Kazakhstan has doubled its investment in digital mining to $20 million.
Askar Zhumagaliyev, Kazakhstan’s minister of digital development, said the country will attract more than 300 billion kzt ($738.4 million) in investment over the next three years. Government officials also believe that mining is part of everyday life and essential for digital development. At that time, 14 mining companies already existed and the government was also building energy sources to power the data centers.
By the end of the year, they had raised $201.7 million in investments and laid the legal groundwork to move forward in overseeing global mining activities.
Why is Kazakhstan the country with the best mining conditions today?
There are many factors that play an important role in the increase of investment in bitcoin mining in Kazakhstan. The climate is ideal for bitcoin mining, and thanks to the optimal conditions, the efficiency of these machines will also increase significantly. Temperatures barely exceed 80 degrees Fahrenheit, so mining equipment can easily adapt to the new conditions.
To support these mining activities, the government is creating energy resources to help during the cooling period and has invested nearly $180 million. In addition to stable weather conditions year-round, the country also offers low real estate costs and extremely cheap electricity.
In Kazakhstan, it is cheaper for companies to build mining facilities from scratch. Labour costs will also play an important role in the development of mining companies and data centres. The country is so rich in energy resources that it exports part of its surplus to neighboring countries. If the government were to consider selling the surplus energy and reinvesting it in mining, it would greatly benefit international expansion.
Current energy prices and land values are $0.032/kWh and $5,000/acre respectively. These low prices alone show how profitable mining in Kazakhstan can be. The rising popularity and sentiment in the media show that this country will have the long-term sustainability of cryptocurrencies in the global financial system.
Even the government is fuelling international interest by supporting mining activities and controlling them in an organised way. Therefore, leading companies like BIT Mining and others are choosing Kazakhstan as their next bitcoin mining location.
Major mining enterprises in Kazakhstan
With China’s mining crackdown getting tighter in recent months, we are seeing cryptocurrency mining companies gradually move their operations to Kazakhstan. Some of them have already made huge investments to expand their global mining presence. The two main listed companies are Canaan and BIT Mining LTD.
Canaan is one of the leading manufacturers in the industry and has recently decided to expand outside of its usual location. Kazakhstan therefore seemed the best option for the company to develop additional revenue streams. The mining capacity will allow the company to avoid the volatility of bitcoin and will also be a factor in case of a market rise.
BIT Mining Ltd.
The company once known for its online sports lotteries is now mining bitcoins at a high level. BIT Mining has invested more than $9 million in the construction of mining data centers, giving it an 80% share. The company expects them to reach a total capacity of 60 MW and be operational from July 1.
What China is giving up, its western neighbor, Kazakhstan, seems to be getting back. Many companies are starting to venture into this field, and this country has shown time and time again how reliable it can be in any situation. Investments in Kazakhstan are more profitable than in the United States, and the establishment of mining companies is much faster. Mining machines have already arrived in Kazakhstan, and we will soon see more diversity in bitcoin’s hashing power. It may not matter today, but Kazakhstan will certainly be one of the top three countries for hashish distribution.
Kartikeya Gutta, born and raised in India, is a cryptocurrency journalist and freelance writer for the website itsBlockchain. It covers various aspects of the industry through in-depth analysis and research. His passion for blockchain and the crypto-ecosystem is largely because he believes it can truly change the world and help millions of people.