As reported by The Times, Iran has pointed the finger at Bitcoin miners for causing the latest series of blackouts in several cities, including capital Tehran. One mine run by Chinese-Iranian miners in Rafsanjan apparently gobbled up 175 megawatt-hours of electricity. This is enough to power the average Western home for 17 years.
Tanavir, Iran’s state electricity firm, has responded to the blackouts by temporarily shutting down all of its known cryptocurrency mines. Tasmin News Agency reported that around 45,000 mostly application-specific integrated circuits (ASIC) machines were confiscated this Sunday by the nation's electricity board.
Why Is Bitcoin Mining So Resource Hungry?
Bitcoin follows a proof-of-work (PoW) algorithm to maintain consensus within its system and create fresh blocks. In PoW, miners solve computationally hard cryptographic puzzles to get the opportunity to add a block to Bitcoin’s blockchain. However, this process consumes a huge amount of resources and computational power. As per IEA, Bitcoin currently consumes around 20‑80 TWh annually, or about 0.1-0.3% of global electricity use.
Why Are Bitcoin Miners Attracted to Iran?
In 2018, Iran was identified as the next great mining hotspot due to one primary reason: the low electricity cost. With a price of electricity as low as $0.006 per kilowatt-hour, Iran easily takes the cake as one of the world's most affordable counties – electricity wise. For example, in China, the Sichuan province that benefits significantly from hydroelectricity never goes below $0.02 per kilowatt-hour.
Actions Taken By The Government Against Mining
Earlier this month, Iranian authorities shut down 1,620 illegal cryptocurrency mining farms, which apparently consumed 250 megawatts of electricity over the past 18 months.
Before that, around July 2020, Iran had created a directive forcing miners to disclose their identities. This also forced them to disclose their mining farms' size and their mining equipment type to the Ministry of Industry, Mines and Trade.
Sharp U-Turn In Sentiment
Over the last couple of years, the government’s actions seem to be starkly different from the positive sentiment they were showing around 2019.
Iran had previously praised Bitcoin since it allowed the country to press payments outside of the traditional banking system, bypassing crippling US trade sanctions. In fact, in December 2019, President Rouhani announced would launch its own national cryptocurrency (CBDC). Miners were also given a staggering six-hundred megawatt-hour of power in total to operate cryptocurrency farms. At one point, Iran was mining eight per cent of the world's Bitcoin.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.