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Why is Crypto Mining Causing Blackouts in Central Asia?

Millions of residents in three countries were left without electricity for hours after a shared power line suffered a major failure. According to reports, the line connecting several areas of Kazakhstan, Uzbekistan, and Kyrgyzstan was disconnected due to an “emergency imbalance” in a power grid. Central Asia has been facing a severe energy crisis as early as 2008. Things worsened in 2021 due to the overconsumption of energy in Kazakhstan, mainly due to the boom in crypto mining.

The data centres demanded more and more electricity when the country was still heavily dependent on fossil fuels. It has been causing blackouts repeatedly for the past few months. Kazakhstan has recently blocked cryptocurrency mining from January 24 to January 31. The country is the second-largest hub for mining bitcoin after the USA hosting more than 18% of global bitcoin mining.

Crypto Mining in Kazakhstan Suffers a Huge Blow

Since China made crypto mining illegal in June 2021, Kazakhstan became a new home for miners. Soon it became the most prominent farm where thousands of unregistered computers worked together to verify transactions and make new coins. It drastically affected the country’s power grid, which already had a sorry infrastructure.

As the power demand increased, electricity consumption increased by 8% in 2021. The energy authorities could only identify 50 registered mining companies, whereas many worked in the dark. The authorities claimed these hidden miners were the reason for the energy deficit. Moreover, in January 2022, violent protests erupted against the autocratic government, which led to an internet shutdown. It affected the global production of bitcoin as it took about 15% of the bitcoin miners offline from the entire world. Due to that, bitcoin dropped below 43,000 USD for the first time since September 2021.

The internet outage revealed the value of Kazakhstan in the entire bitcoin ecosystem. The problem is that Kazakhstan mining farms are powered by ineffective coal plants that already carry the entire towns. The country adopted crypto mining but failed to repair and upgrade its infrastructure. Therefore, blaming the mining process seems like a scapegoat to hide real problems.

Three Countries Facing Energy Crisis

The recent blackout caused disruptions to all three ex-soviet nations. According to the reports, many people lost access to water, gas, the internet, and fuel. Hospitals used alternative power sources (generators) to operationalise the medical equipment. Underground trains were also stuck in the tunnels.

The outage also affected traffic lights causing traffic jams in the Uzbekistan capital, Tashkent. The metro system was shut down, and many flights could not land at the airport. Moreover, many skiers were stranded on dormant cable cars at Amirsoy, the largest ski resort in Uzbekistan.

The power is back in most of the areas, but there are still fears regarding the 50-year-old power line halting crypto mining in the region.

Forced to Turn to Russia

Not only the primary power line but nearly all of the energy infrastructure in Central Asia was built during the Soviet Era (the 1970s). Almost 70% of it reportedly needs rehabilitation. Energy transmission lines usually lose 15 to 16% of electricity. In recent years, billions of dollars were wasted on the old systems, but blackouts remained frequent in summers and winters.

The ancient line allows Kazakhstan to borrow power from Russia whenever it faces energy outages. Only the brand new power plants or clean energy solutions could save Central Asia from energy crises. But, this would also take away its dependency (or intentions) on getting energy from Russia. As for crypto mining, the miners can certainly move elsewhere where disruptions are less if the country is no longer worthy of supporting the process.

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