When Denis Rusinovich  set up cryptocurrency mining company Maveric Group in Kazakhstan in 2017, he thought he had hit the jackpot. Next door to China

As Kazakhstan Descends Into Chaos, Crypto Miners Are at a Loss

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2022-01-13 01:30:09

When Denis Rusinovich set up cryptocurrency mining company Maveric Group in Kazakhstan in 2017, he thought he had hit the jackpot. Next door to China and Russia, the country had everything a Bitcoin miner could ask for: a cold climate, legions of old warehouses and factories where the mining rigs could be installed, and—especially—dirt cheap energy to power the electricity-guzzling process through which cryptocurrency is minted.

“That was a good opportunity,” Rusinovich says. When China outlawed cryptocurrency mining overnight last June, many miners based in the country—which at the time made up between 60 and 70 percent of Bitcoin’s mining network—made the same call and hastily relocated to Kazakhstan, bringing to the country as many as 87,849 mining machines, according to a Financial Times estimate. Less than a year later, the initial buzz is history: Miners are now being confronted with frozen machines, popular unrest, and Russian troops roaming across the country. And leaving is not an option.

Last week, chaos engulfed Kazakhstan as protests in the south of the country over a spike in fuel prices resulted in police repression, the removal of former president Nursultan Nazarbayev from his role as head of the security council, and an internet shutdown. Russian-led troops acting under the orders of the CSTO, a military alliance of post-Soviet states, were deployed to the country. The shutdown’s impact on crypto mining was evident—the Bitcoin network lost 12 percent of its hashrate. Jaran Mellerud, an analyst at cryptocurrency insights company Arcane Research, estimates that the shutdown alone might have cost Kazakh miners $7.2 million. For many miners, that was just the latest in a series of unfortunate circumstances that had dogged their operations for months. Those tempted to relocate to the country for its low energy prices had found that its aging power grid was not prepared to handle the sudden influx of miners, which caused a spike in the consumption of energy. The government said mining accounts for 8 percent of the country’s capacity. Grappling with blackouts and power cuts, in October 2021 the government announced it would start rationing power supply to registered miners and unplug them if the grid came under any stress.

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