Where should crypto miners go in a changing landscape?

One of the main themes for the crypto community in 2021 was China’s aggressive policy towards mining, which led to a complete ban on such activities in September.

While mining as a type of financial activity has not gone away and should not go away, Chinese cryptocurrency miners have had to look for a new place to set up shop. Many of them have moved to the United States – the new mining mecca of the world – while some have gone to Scandinavia and others to neighboring Kazakhstan, with its cheap electricity.

Mining activities cannot remain under the radar indefinitely, and governments around the world have begun to worry about electrical capacity and power outages.

Erik Thedéen, vice-president of the European Securities and Markets Authority – who is also the chief executive of the Swedish Financial Supervisory Authority – has called for a ban on the mining of proof-of-work cryptocurrencies like Bitcoin ( BTC) in Europe.

As jurisdictions around the world begin to crack down on mining-related activities, the question arises, “Where is it still profitable and legally beneficial to mine crypto?”

Related: Finding a New Home: Bitcoin Miners Settle After China Exodus

North America

It is no secret that the United States is the leading country for crypto mining, especially in the Lone Star State, Texas. After the exodus from China, crypto miners and billions of dollars in capital flowed into the southern state. This is largely due to state policy, with Governor Greg Abbott having actively supported the Bitcoin industry.

Philip Salter, CEO of crypto mining firm Genesis Digital Assets, told Cointelegraph why the state has become a popular destination for miners:

“Perhaps the most important location for miners in the world is Texas right now. Its huge amounts of wind and solar power cause an affordable energy surplus. Private power grids ensure a fast lane for new projects, unhindered by slow bureaucracy. The advantages of Texas, however, are not so new. Miners started building there years ago, although they are not as aggressive as they are today.

Texas has had its own power infrastructure issues, with massive outages affecting much of the state in 2021 amid unusual winter storms. But miners there have been relatively understanding about power consumption, and large companies have even periodically turned off equipment to prioritize residential consumers and critical infrastructure.

America’s northern neighbour, Canada, is also actively attracting mining companies. Recently, authorities in Alberta invited cryptocurrency miners to the province, touting its cheap electricity prices thanks to an abundance of local natural gas.

Latin America

Latin American countries have made considerable efforts to attract miners, with El Salvador in particular showing a favorable attitude towards mining. The country was the first in the world to recognize Bitcoin as legal tender. The Salvadoran government has not been shy about investing directly in Bitcoin and is even planning to build a city dedicated to the preeminent cryptocurrency where the electricity to mine BTC would come from geothermal power plants fueled by volcanoes.

Costa Rica is also gradually becoming favorable to mining due to low electricity prices. Thanks to mining, a hydroelectric plant that had been closed during the COVID-19 pandemic has now reopened.

Major crypto companies have also started to set up shop in Costa Rica. Chia Network, a blockchain network created by BitTorrent founder Bram Cohen, has agreed to provide technical services for Costa Rica’s national climate change initiatives.

Argentina was very popular among miners until the government recently decided to reduce subsidies to miners and increase taxes on mining activities. So far, these changes in financial policy for mining have been limited to the province of Tierra del Fuego, known for its cold climate. Nevertheless, Argentina remains a good location for mining operations even after increases in the price of electricity, given the energy crisis in competing regions like Europe.

Mining is still possible in Europe

Crypto mining operations in Europe remain relatively limited, as high electricity prices amid the energy crisis and a generally skeptical attitude towards cryptocurrencies from regulators are prompting crypto firms to think twice before setting up on the continent.

Indeed, the Nordic nation of Iceland was previously a hotspot for Bitcoin mining, with its subarctic volcanic landscape providing cheap electricity and low cooling costs for mining farms.

A Genesis Mining farm in Iceland. Source: Marco Krohn.

However, at the end of last year, the country’s national electricity company, Landsvirkjun, reduced the amount of electricity it would supply to energy-intensive industries such as Bitcoin mining and metal smelting. aluminium, citing capacity issues.

Despite the continent’s limitations, there are a few places in Europe where miners have decided to settle where geography and climate play an important role in attracting business.

In Georgia, located in the Caucasus region, the large number of hydroelectric power plants built when the country was a Soviet republic – as well as its relatively small population – provided a large amount of cheap electricity to miners.

Major crypto mining companies have already set up operations in the country. In 2014, Dutch mining company Bitfury opened its first data center, with a 20 megawatt draw, in the town of Gori in eastern Georgia.

The success of Bitfury opened the eyes of many Georgians who actively started acquiring powerful video cards and creating their own small crypto-mining farms. According to the World Bank, 5% of Georgia’s population was engaged in crypto mining in 2018.

It should also be noted that Russia remains an epicenter of crypto mining thanks to low energy costs and a cold climate.

Andrei Loboda, Director of Public Relations at BitRiver – the largest provider of cryptocurrency mining colocation services in Russia – shared with Cointelegraph some specific regions where it will be convenient for miners to work if the Russian government becomes more favorable. to crypto-currencies:

“According to BitRiver, today about 300,000 people are engaged in Bitcoin mining in the Russian Federation alone. Our company performs power-intensive high-speed calculations in data centers in a number of regions of the Russian Federation, including the Irkutsk region and the Krasnoyarsk Territory. The green and digital technologies that we are implementing in our work as part of the digital energy transition have already given additional impetus to the development of territories.

Is mining worth it?

Geography is a critical element for miners to consider, whether it’s electricity and cooling costs or regulatory issues. However, there are certain expenses, like hardware, that miners will take with them wherever they go.

With the increase in demand for mining equipment and the recent fall in the markets after the 2021 bull run, when is mining worth it with all the hardware costs?

A homemade bitcoin mining rig with GPUs. Source: BitcoinWiki.

2021 has been the most profitable year for mining Ether (ETH) with GPUs since 2016. This is no surprise, as the price of Ether has more than quadrupled in the past year. But the main problem for miners is the expense of electricity and equipment, and the price of the latter is rising rapidly.

Nevertheless, while the profitability of Ether mining remains high, the payment period for equipment purchases is increasing, in part due to the London hard fork in August 2021 which reduced the payment for each block mined from 8-20 ETH to 2 ETH. Another negative factor for miners will be the long-awaited transition of the Ethereum blockchain to proof-of-stake consensus, after which they will have to start mining altcoins or recertify themselves as stakers on the network.

The Bitcoin network’s mining difficulty recently hit an all-time high despite BTC’s price falling sharply in January, which hit a monthly low of around $34,300.

It is surprising that, in this context, the cost of ASICs has not gone down. At the same time, ASIC’s payback period this year is just over 1,000 days, or almost three years. Not everyone can afford to bear these expenses for so long.

There are a multitude of changing factors for miners to consider, but one thing is clear: cryptocurrency mining is a flexible and adaptive industry, and companies have proven their willingness to move to locations more advantageous if their current location turns out to be less than ideal.

Back To Top