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Highlights
- The global bitcoin network power slumped sharply after Kazakhstan’s internet was shut down due to ongoing political unrest.
- Kazakhstan is the second-largest centre for bitcoin mining in the world after the US.
- Mining process in cryptocurrency is a complicated, time-consuming and energy consuming process.
The global bitcoin network power saw a major dip in the last few days after Kazakhstan’s internet was shut down due to ongoing political unrest, which has engulfed the whole country. Kazakhstan was the second-largest centre for bitcoin mining in the world after the US in 2021.
As per the latest data, the country accounted for 18% of the global “hashrate”, which is only second to the US, after China banned crypto trading and mining in April 2021 following its pledge to cut down its carbon emission. The United States is the leading country in Bitcoin blockchain’s hashrate in the world with a prominent contribution of 35.4 per cent.
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According to BTC.com, the internet shutdown in Kazakhstan resulted in a slump in “hashrate”, which is the computing power used by a crypto network to mine bitcoins. The hashrate was down by around 14% on Thursday as compared to Tuesday.
As per coinmarket.com, Bitcoin prices slumped by around 5% to US$41,000 on 7 January, lowest since September 2021 after a broad sell-off for cryptocurrencies, down from a November peak of over US$60,000. On 9 January, the prices of Bitcoin were around US$41,717.08, down by 0.86%, in last 24 hours, with a current market capitalisation of US$790.14 billion.
Unrest in Kazakhstan
Kazakhstan has been dealing with mass protests since the beginning of the year due to sharp hike in fuel prices, which led to internet crackdown across the country on 5 January preventing miners from accessing the bitcoin network. The protest become violent after protestors attacked government buildings, which led to state emergency.
On 6 January, Russia sent paratroopers in the country to suppress the violence spread across the tightly controlled former Soviet state, wherein dozens of protestors were killed, and hundreds were injured.
Also Read: What is a Decentralised Crypto Exchange?
Crypto mining in Kazakhstan
Crypto mining is a complicated process, which needs high-powered computer and electricity that can solve complex mathematical problems to produce currencies into circulation. Kazakhstan has abundant cheap energy resources, like coal, making it one of the attractive places for crypto miners.
Also Read: Where Will Crypto Go in 2022?
Higher amount of computer power is required to mine new bitcoin. If there are more miners on the network that can led to fall in hashrates. Due to the internet shutdown, which started on 5 January, the Bitcoin mining industry suffered heavily, which is worth billions, suffered heavily. If miners drop off the network, it becomes easier to mine new coins.
In 2021, the Kazakhstan government announced its plan to ban unregistered grey miners who might be using twice the computer power up to 1.2 GWt as compared to the white or registered miners that uses 600MWt of power.
Also Read: Why Kosovo Banned Crypto?
US Fed remarks
As cryptocurrencies are global and decentralisted in nature, a single factor cannot be blamed for its price fluctuations. Apart from the political events in Kazakhstan, experts said Bitcoin prices saw a slump after the US Federal Reserve said in a meeting that it would raise interest rates sooner than what it had said before. This could lead to drop in cryptocurrency prices further.
