The power of the Bitcoin network collapses as Kazakhstan’s crackdown hits cryptocurrency miners

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  • Bitcoin’s “hashrate” drops after internet shuts down in Kazakhstan
  • Country that accounted for 18% of bitcoin’s global output power in August
  • The share has risen sharply after China’s crackdown
  • Kazakhstan shuts down the internet after deadly protests

LONDON, Jan. 6 (Reuters) – The bitcoin network’s global computing power dropped dramatically when Kazakhstan’s internet shutdown this week during a deadly riot hit the country’s fast-growing cryptocurrency mining industry.

Kazakhstan became the world’s second-largest center for mining bitcoin after the United States last year, according to the Cambridge Center for Alternative Finance, after China’s main hub halted cryptocurrency mining.

Russia sent paratroopers to Kazakhstan on Thursday to help quell the uprising across the country after violence spread to the tightly-controlled former Soviet state. Police said they killed dozens of rioters in the main city of Almaty, while state television reported that 13 members of the security forces were killed.

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The internet was shut down on Wednesday across the country in what monitoring site Netblocks called “a nationwide internet blackout.”

The move would likely have prevented Kazakhstan-based miners from accessing the bitcoin network.

Bitcoin and other cryptocurrencies are created or “mined” by high-powered computers, usually in data centers in different parts of the world, which compete to solve complex mathematical puzzles in an energy-intensive process.

As of August last year, the most recent data available, Kazakhstan accounted for 18% of the global “hashrate” – the jargon of cryptocurrencies for the amount of computing power used by computers connected to the bitcoin network.

In April, before China’s latest crackdown on bitcoin mining, the figure was only 8%.

The hashrate in major cryptocurrency mining pools – groups of miners in different locations who come together to produce bitcoin – including AntPool and F2Pool Thursday at 1215 GMT fell about 14% from its level on Tuesday, according to data. of the mining company BTC. com. Neither pool immediately responded to a request for comment from Reuters,

CRACKDOWN ON CRYPTO MINING

However, a drop in hashrate is not necessarily favorable to the price of bitcoin.

Bitcoin dipped below $ 43,000 on Thursday, testing multi-year lows after investor appetite for riskier assets declined as the US Federal Reserve moved towards more aggressive political action. to know more

The more miners on the network, the more computer power is needed to mine new bitcoins. The hashrate decreases if miners leave the network, theoretically making it easier for the remaining miners to produce new money.

Kazakhstan’s cryptocurrency mining farms are mostly powered by old coal-fired power plants which in turn, along with the coal mines and entire towns built around them, are a headache for authorities as they try to decarbonise the economy.

The Kazakh government said last year that it planned to crack down first on unregistered “gray” miners who are estimated to consume twice as much energy as “white” or officially registered ones.

Its energy ministry said last year the “gray” mines could consume up to 1.2 GWt of energy, which together with the 600 MWt of the “white” mines represent about 8% of the total generation capacity. of Kazakhstan. to know more

The country’s uprising began with protests in the west of the country against a hike in fuel prices on New Year’s Day.

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Reporting by Tom Wilson; Editing by Emelia Sithole-Matarise

Our Standards: Thomson Reuters Trust Principles.

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