China always had the lion’s share of bitcoin mining in the world, but recent crackdowns on miners are reducing that dominance and forcing miners to relocate to other countries offering cheap electricity and support for domestic bitcoin mining. One such third-world country that has flown under the radar all this time in Kazakhstan. Before China issued a strict ban and miners relocated overseas, Kazakhstan accounted for more than 6% of global bitcoin mining hash power. A majority of the mining community feels relocating to Kazakhstan is the best possible option to increase cost savings and find well-priced land for setting up mining farms.
We are already seeing top mining companies make lucrative investments in local mining partners in Kazakhstan, and are also facilitating the smooth shipment of thousands of mining machines from China. With more interest coming from the global crypto market and visionaries of bitcoin, Kazakhstan has earned a much-deserved international presence and it is now an ideal relocation site for mining companies. In this article, we are going to understand several aspects of cryptocurrency mining in Kazakhstan and deep dive into the companies leveraging this opportunity.
Crypto Mining History in Kazakhstan
Kazakhstan predominantly has been a top crypto mining hub in the world. In 2019, it was in sixth place in terms of hash power, and it now stands as the fourth-best mining destination in the world. It may seem that companies are highly interested now in allocating considerable money and resources for miners in Kazakhstan, but back in the day, it was a completely different landscape for cryptocurrency mining.
From a blanket crypto ban to legalizing its mining operation, the Kazakh government took so many turns before fully supporting the implementation of digital currency.
In 2018, the directors of the National Bank of Kazakhstan wanted to ban all forms of digital money and they did not want the citizens to take part in this kind of monetary exchange. However, a couple of weeks later, the same group of officials came out to support worldwide participation in crypto.
The government was already embracing this new cryptocurrency market system back in 2017, but they never highlighted the guidelines specifying further development is going to happen.
One major enabler for the implementation of blockchain solutions was AIFC’s working group, which included Deloitte, Waves, Juscutum, and Kesarev Consulting. They heavily focus on creating a fresh environment in Kazakhstan to attract more foreign investments in the blockchain and cryptocurrency space. That is exactly what happened.
The Kazakh government implemented a regulatory approach and planned a roadmap to strengthen the country’s position in the global crypto market. The investments started flowing into the country, and according to a report from the China Ministry of Commerce, Kazakhstan doubled its digital mining investment, which accounts for 20 million USD.
In 2020, Askar Zhumagaliyev, the Kazakh Minister of Digital Development, said the country will attract more than 300 billion tenge (US$738.4 million) of investments in the next three years. The government officials also considered mining as a part of everyday lives, and it is crucial for the development of digital technologies. At that time, there were already 14 mining farms, and the government was also building energy sources to power the data centers.
By the end of the year, they had brought in investments worth $201.7 million and established a legal basis to move forward in monitoring global mining activities.
Why is Kazakhstan now the best mining-friendly country?
Many factors are playing a huge role in amplifying investments in bitcoin mining in Kazakhstan. The climate is ideal for bitcoin mining, and due to its optimal conditions, the efficiency of these machines will also improve significantly. We barely see the temperature exceed 80 degrees Fahrenheit, so mining equipment can easily adapt to this new environment.
To support these mining farms, the government is creating energy sources to help with the cooling period, and they have nearly invested $180 million. Apart from having a stable climate condition all year round, the country also offers low real estate costs and extremely cheap electricity.
It is more flexible for companies to build mining facilities from the ground up in Kazakhstan. The labor costs are also going to play a vital role in establishing mining facilities and data centers. The country is so rich in energy resources that they export a portion of its surplus to neighboring countries. If the government plans to sell surplus energy and reinvest it into mining, it will greatly help with international expansion.
Right now, the energy prices and real estate costs are $0.032/kWh and $5000/acre of land, respectively. These low prices themselves showcase how profitable mining can be in Kazakhstan. The rise in popularity and Media sentiment shows this country is going to have the long-term staying power of cryptocurrencies in the global financial system.
Even the government is also fueling international interest by supporting mining activities and monitoring them in an organized manner. That is why we are seeing top companies like BIT Mining and others choose Kazakhstan as their next location for bitcoin mining.
Major companies leading Mining Operations in Kazakhstan
As China’s crackdown on mining activities intensified over the last couple of months, we are seeing crypto mining firms slowly move their operations to Kazakhstan. Some of them have already made huge investments to expand their global presence in mining. Two main publicly listed companies involved are- Canaan and BIT Mining LTD.
Canaan is one of the leading manufacturers in this industry and they have recently stepped into expanding their business scope out of their usual location, so Kazakhstan seemed to be the best option for the company to create more revenue streams. The mining facilities are going to help the company avoid bitcoin volatility, and it is also going to factor in when the market upturns.
BIT Mining LTD
A company formerly known for online sports lottery is now working on bitcoin mining at an elite level. BIT Mining invested more than $9 million to establish mining data centers, giving them 80% of the share. The company expects to reach 60MW in total power capacity, and they will be operational from the first of July.
What China has let go of seems to be picked by its neighbor to the west- Kazakhstan. Many companies are starting to explore this venture, and this country has repeatedly shown how reliable it can be in any situation. It is more cost-effective to invest in Kazakhstan than in the US, and it is also easy to establish mining facilities at a much faster rate. The mining machines have already arrived in Kazakhstan and we are soon going to see more diversity in bitcoin hash power. It may not be significant right now, but Kazakhstan is sure going to be in the top three in terms of hash power distribution.
Born and brought up in India, Karthikeya Gutta is a crypto journalist and freelance contributor for ItsBlockchain. He covers various aspects of the industry with in-depth analysis and research. His passion towards blockchain and crypto ecosystem is mainly because he believes it can really change the world and help millions of people.
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