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Cryptocurrency miners require a large amount of electricity for mining. But due to the high energy consumption, some jurisdictions do not approve the mining of digital currency. Moreover, mining activities have recently posed another threat to the environment due to the energy source.
Some miners use fossil fuels to produce the electricity needed for mining. Burning these fuels leads to the release of carbon monoxides that pollute the environment. Consequently, some governments have introduced strict measures regarding the mining of digital currency.
Prohibitions on cryptocurrency mining
China’s Ban on Cryptocurrency Mining
In 2021, China launched a war against cryptocurrency mining, especially Bitcoin mining. For the first time, the Chinese government has issued several warnings about mining and trading digital assets in the country. Subsequently, a ban on cryptocurrency mining broke out in various provinces of China, primarily in the provinces of Xinjiang, Sichuan, Beijing and Yunnan.
Before the crackdown on cryptocurrency mining, China was the world’s largest digital mining country.
Tough legislation of Kazakhstan
Moving away from the borders of China, many miners found solace in Kazakhstan. First, the government opened its doors to miners. Kazakhstan became the next country favorable for crypto mining, and then the second largest Bitcoin (BTC) mining base in the world.
However, the miners’ joy was short-lived due to frequent power outages. The government of Kazakhstan has initiated tough legislation to disconnect electricity from crypto mining.
Lawmakers have dramatically raised the once low cost of energy to a very high level, discouraging miners. In addition, the country has passed more unfriendly laws, marking all unregistered cryptocurrency mining as an economic crime.
Texas Freezes Network Connection Permissions
Although most miners moved to Kazakhstan during the crackdown from China, some miners decided to choose the United States of America as a new point for cryptocurrency mining.
An attractive aspect for miners was the low cost of electricity in Texas. The country has provided the right infrastructure support that cryptocurrency miners need for their work.
Energy sources in the U.S. are the most renewable and affordable for miners. Miners typically compete in a low-margin environment, using electricity as the only variable cost. Consequently, the cheaper the cost of energy, the higher their profitability.
Unfortunately, the U.S. electricity tariff is gradually rising. Thus, the opportunity to remain profitable for miners in the US drops sharply.
What’s more, some miners who have migrated to the country now have trouble connecting to the network even with such increased rates. Thus, the U.S. seems to be losing its position as the best destination for miners.
Miners are looking for an alternative
As the complexity of mining increases, miners are looking for new ways to mine digital assets. For this reason, the cryptocurrency community can pay attention to post-Soviet countries like Armenia. This mountainous country seems to have good potential with its cheap electricity and support from the government.
In 2018, the ECOS Free Economic Zone was established by a government decree. The idea was to stimulate the expansion of the blockchain industry in the country and other technology sectors. What’s more, in August 2022, ECOS announced the addition of 60 MW of capacity to its power plant at affordable prices.
The mining complex, located at one of the hydroelectric power plants on the Hrazdan River, receives electricity directly from the high-voltage network and uses the site’s infrastructure to power containers. Representatives of the platform noted that ECOS can expand to an additional 200 MW of clean electricity.
The mining capacity of the free economic zone is provided by the electricity of the Hrazdan TPP, located in the mountainous region of Armenia with a low average annual temperature, which makes it profitable to reduce cooling costs. ECOS marketing manager Anna Komashko calls the latter a serious advantage, referring to the recent problems of miners in Texas after the scorching heat. in the Southern State. Currently, 60% of the 260,000 users of the Armenian facility are from the United States and Europe.
By 2021, the price per kilowatt-hour (kWh) of energy in Armenia was $0.077, which was relatively lower than in developed markets (take, for example, $0.372 in Germany or even $0.15 in the US), but still higher than in Kazakhstan ($0.041), Uzbekistan ($0.028) or Iran ($0.005).
Author: Anton Zaitsev, Analyst Freedman Club Crypto News
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