Kazakhstan unrest takes down a fifth of global bitcoin mining network

The second largest bitcoin mining nation in the world has cut off internet access, slashing the amount of computing power dedicated to the cryptocurrency

By Matthew Sparkes

Nationwide internet outages in Kazakhstan amid civil unrest have knocked almost a fifth of the world’s bitcoin miners offline. Vast numbers of mining groups that had relocated to the central Asian country after a state crackdown in China last year now find themselves once again out of action.

Bitcoin relies on a network of computers known as miners that solve mathematical problems to secure the currency, consuming vast amounts of electricity in the process. But without a working internet connection, the process is impossible.

China was once the global powerhouse of bitcoin mining with a market share of 75.5 per cent, but government restrictions in May last year caused the entire industry to relocate and seek friendlier states with cheap energy. Kazakhstan was an attractive location for these groups because of abundant cheap energy, but because fossil fuels, including coal, make up more than 90 per cent of the nation’s electricity supply, it did little to help bitcoin’s already large effect on the climate.

Kazakhstan had just 1.4 per cent market share in September 2019, but this rose to 18.1 per cent in August 2021. At the same time, the US more than doubled its own global market share to become the world’s largest bitcoin mining nation, from 16.8 per cent in April to 35.4 per cent at the end of August.

Now surging fuel prices in Kazakhstan have caused civil unrest, involving violent clashes between protesters and security forces. President Kassym-Jomart Tokayev reportedly ordered telecom providers to block internet access on 6 January. Without an internet connection to other miners around the world, Kazakh mining groups were unable to continue work. According to BTC.com, a data service for the cryptocurrency industry, the global hashrate – the measure of computing power dedicated to mining bitcoin – fell by 14 per cent from Tuesday to Thursday.

Sporadic connections to the internet have been made in the country in recent days, but widespread reports indicate that these are few and far between, and temporary.

Didar Bekbau, a bitcoin miner based in Kazakhstan, said on Twitter: “No internet, so no mining. Internet is blocked in Kazakhstan. Mobile operators, home internet, everything.”

Although miners are essential to maintaining the bitcoin network, there are enough outside Kazakhstan to keep the cryptocurrency working in places with working internet connections.