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How political turmoil in Kazakhstan hits bitcoin

2022-01-07T10:33:12.933Z


The current political turmoil in Kazakhstan is affecting the vast bitcoin mining industry of the Central Asian country.


An outbreak of violence in Kazakhstan.

What happen?

0:43

New Delhi (CNN Business) -

Political turmoil in Kazakhstan is affecting the country's vast bitcoin mining industry.

The Central Asian nation was thrown into chaos when violent protests caused by rising fuel prices left dozens dead and hundreds injured.

As part of the chaos, internet and telecom outages have been reported across the country, and that is having an impact on local cryptocurrency mining operations, which are among the largest in the world.

  • Kazakhstan is mired in chaos and troops from countries in the region have been dispatched to quell the protests.

    This is what you should know

Kazakhstan emerged as a popular mining hub last year after neighboring China cracked down on such activity.

Chinese authorities said the restrictions were necessary to protect the country's efforts to reduce carbon emissions.

What is cryptocurrency mining and why is Kazakhstan so important?

Cryptocurrency mining is a complicated process by which new coins are put into circulation.

Mining requires high-powered computers that solve complex mathematical puzzles to create a new "block" in the blockchain.

It requires significant computing power and electricity, and Kazakhstan, with its abundant energy resources, became an attractive alternative to China for miners.

See how the crisis in Kazakhstan affects the world 0:48

Kazakhstan accounted for more than 18% of the global bitcoin network's hashrate in August last year, the latest month for which data is available, according to the Cambridge Center for Alternative Finance.

That is second only to the United States.

Hashrate refers to the total computational power that is used to mine cryptocurrencies, according to CoinDesk.

It is not yet clear when internet services will be restored in Kazakhstan, so it is difficult to know how profound the impact will be for crypto miners.

According to Internet monitor Netblocks, connectivity had been suspended for 36 hours as of Friday morning.

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  • How bitcoin mining works

Just hours after the internet blackout, the hashrate saw a 12% drop, tweeted Larry Cermak, vice president of research at cryptocurrency website The Block.

Investors are getting nervous.

The price of a single bitcoin fell to $ 42,000 on Friday, its lowest level since last September.

The cryptocurrency has also come under pressure after the US Federal Reserve signaled that it could undo economic stimulus more aggressively than investors expected.

Why did the protests start?

The protests in Kazakhstan began over an increase in fuel prices.

But there are also other long-standing problems behind the public anger, such as income inequality and economic hardship, which have been exacerbated during the coronavirus pandemic, according to Human Rights Watch.

This uprising could lead miners to now look to conduct their operations elsewhere, according to Anirudh Rastogi, founder of technology law firm Ikigai Law, which works with cryptocurrency exchanges in India.

The countries that lead bitcoin mining 0:52

"Eventually it will come down to miners finding the right center for their activities," he said.

"They need a place with political stability and cheap electricity."

Kazakhstan has already been struggling to cope with the huge demands on its power grid due to the rise in crypto mining, the Financial Times reported in November.

He added that power outages in the country have led to the closure of a major crypto mining farm.

According to Rastogi, such problems at major crypto hubs may force the industry to accelerate the adoption of more sustainable technology for mining, which consumes much less electricity.

Kazakhstan

Source: cnnespanol

All news articles on 2022-01-07

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