How could instability in developing countries alter the Bitcoin mining landscape?

Following the news about nationwide protests in Kazakhstan causing an internet blackout in the Bitcoin mining country that resulted in a significant drop in hash rate, CryptoSlate spoke with Alan Konevsky, Legal Director of first block.

PrimeBlock is a digital asset mining and infrastructure provider, currently operating approximately 1000 PH / s in hash capacity, equivalent to around 0.6% of the total global Bitcoin hash rate, with mining facilities spread across the states. United States and Canada.

Konevsky commented on recent developments in Kazakhstan and Kosovo, shedding some light on their impact on the industry, from an internal perspective.

Developing countries struggle to keep up

Crypto mining aside, developing countries like Kazakhstan and Kosovo have limited power grids, which cannot handle the high demand.

“Power generation and distribution infrastructure is often a weak point,” Konevsky said, pointing to the bottleneck for developing countries struggling to keep up with technological advancements.

“Political instability feeds and flows from such struggles and exacerbated their impact and duration,” he explained.

At the end of last year, Central Asia, from western Kazakhstan to southern Tajikistan,suffered from power and energy shortages after being hit by a severe drought, limiting hydropower production and, as a result, Bitcoin mining.

In November, the Kazakhstan Electric Network Operator Company (KEGOC) explained that the problems were caused by malfunctions, but also by excessive use of the system, which the government attributed to crypto miners who grouped to Kazakhstan from China.

“Similarly, Kosovo’s largest coal-fired power plant was recently shut down due to a technical problem, so they were forced to import electricity, the price of which is already on an upward trend,” Konevsky said.

Faced with the worst energy crisis in a decade due to production cuts, the Kosovo government recently issued a blanket ban on crypto mining, in an attempt to curb electricity consumption.

“In the grand scheme of things, these countries’ decisions to limit mining are not so much a reflection of their feelings about blockchain and cryptocurrencies as of their status as developing countries with developing infrastructure,” Konevsky noted, adding that “is already challenging enough. to meet fundamental needs and support economic growth.”

What does this mean for American miners?

According to Konevsky, Bitcoin miners in North America are indirectly affected by these decisions in a number of ways, some of which are quite positive.

“First, less hashing power on the network means more space for miners in North America to increase their participation in the network,” he began by explaining.

“Second, mining companies, including those that relocated after China’s regulatory changes, settled in countries like Kazakhstan and Kosovo because the cost of electricity is much cheaper than in North America. If mining becomes a complete failure in these countries, we could see miners relocate rather than shut down operations, denying the loss of hashing power, “he added.

“Third, the decisions made by these countries could set a precedent for other countries to follow. If other developing countries decide to limit or ban bitcoin mining, it could alter the landscape of bitcoin mining as a whole, ”Konevsky concluded.

The future of competition

“This industry is mobile, to a degree,” Konevsky noted, commenting that as the Bitcoin mining industry matures, a stable political climate and stable inputs will play a decisive role.

Like other developing industries, “as companies seek scale in the face of energy and equipment supply barriers and grapple with asset price movements and other market challenges,” horizontal consolidation is expected and vertical.

As he explained, “Going public is a great way for crypto companies to raise money, gain more legitimacy, and even gain access to new markets through a greater financial powerhouse.”

“Large mining companies have the resources and scale to weather the ups and downs of the market,” Konevsky explained, due to their ability to buy new equipment when prices are high and rent or buy space in data centers.

“Smaller miners, on the other hand, may not be able to survive if the price of Bitcoin falls too low or if they cannot compete with large mining companies,” he noted, adding that in the long run … there will always be competition. among the miners ”.

Although he was unable to reveal specific details about the company’s plans for 2022, Konevsky assured that PrimeBlock is well positioned to meet the challenges of the market.

The company’s strategy is to focus on places that have surpluses of electrical energy and favorable parameters of space, cost and regulation, he explained.

“We have the latest mining equipment, the best partnerships, a scalable and agile strategy that does not rely on long-term development projects, and a team of experienced professionals,” he concluded, adding that PrimeBlock is well equipped to meet the challenges. of a landscape of developing countries.

Posted in: Bitcoin, Mining

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