Tom Wilson

LONDON (Reuters – Global computing power for the bitcoin network dropped dramatically after the closing of Kazakhstan’s internet in the wake of a devastating uprising. This was a major blow to the country’s growing cryptocurrency mining industry.

According to the Cambridge Centre for Alternative Finance (CCAF), Kazakhstan was the second largest bitcoin mining center in the world last year, following the clampdown by China.

Russia sent paratroopers to Kazakhstan Thursday, in order to quell the nationwide rebellion that broke out after the violence spread throughout the former Soviet country. While police claimed they killed many rioters in Almaty’s main city, state TV reported that 13 security personnel were among the dead.

According to Netblocks monitoring, Wednesday’s internet outage resulted in “a national-scale internet blackout”

It would likely have stopped miners from Kazakhstan being able to access the bitcoin network.

Cryptocurrencies such as bitcoin and others are “mined” using high-powered computers located in data centers in various parts of the globe. These machines compete in solving complex mathematical puzzles, which is a very energy-intensive process.

The most recent information available shows that Kazakhstan represented 18% in the global “hashrate”, which is the crypto-lingo used to describe the computer power of computers connected to the Bitcoin network.

This was before China’s recent clampdown on Bitcoin mining. It was only 8.8%.

According to BTC.com data, the hashrate of major crypto mining pool – groups made up of different miners from various locations who work together to create bitcoin – was at 1415 GMT on Thursday. It was down about 14% from Tuesday’s level. Reuters requested comment from both pools.

CRACKDOWN IN CRYPTO MINING

However, a decrease in hashrate doesn’t always support the bitcoin price.

Bitcoin dropped below $43,000 Thursday. This was a multi-month low. Investor appetite for riskier assets plummeted as the U.S. Federal Reserve leaned toward aggressive policy actions.

There are more bitcoin miners than there is network power, so the computer power required to mine the new cryptocurrency will be greater. In theory, dropping miners from the network will cause the hashrate to drop. It makes it more difficult for other miners producing new bitcoin.

Kazakhstan’s crypto-mining farms are powered mainly by old coal plants. These, along with the entire towns that are built around them, are an issue for authorities trying to reduce carbon emissions.

According to the Kazakh government, it had announced last year that it was going to first crack down on illegal “grey,” or unregistered, miners. These people are believed by it might use twice as much energy as officially registered “white” ones.

The energy ministry stated that “grey mining” may have consumed up to 1.25 GWt last year, which combined with 600 MWt from “white” miners makes Kazakhstan about 8.8% in total generation capacity.

The protests started in West Virginia against an increase in fuel prices for New Year’s Day.