Iran banned bitcoin mining this week, after four months of continuous blackouts partially due to what officials say is a huge energy suck from illegal mining.
President Hassan Rouhani said at a cabinet meeting Wednesday that a drought in the region was responsible for crippling the country’s supply of hydroelectric power. But, he said, the huge amount of illegal bitcoin mining that happens in Iran was tapping a staggering 2 gigawatts of power each day from the already-stressed grid. (Legal operations, meanwhile, used somewhere between 200 and 300 megawatts.)
Bitcoin, of course, is a huge electricity drain, due to the enormous amount of computing power needed to solve the equations required to mine the cryptocurrency. Digiconomist, which tracks the impacts of cryptocurrency, estimates that the energy use from bitcoin mining each year is between the current energy use of the Netherlands and Pakistan.
Rouhani said around 85% of this 2-gigawatt power suck was from unlicensed operations. Iran has become a hotspot for illegal mining after many miners began to decamp there to take advantage of the country’s heavily subsidized energy (partially due to the fact that Iran can’t sell its oil due to international sanctions). Around 4.5% of the world’s total bitcoin mining now takes place in Iran, making it one of the top 10 bitcoin-producing countries in the world. The crackdown by the government may knock it off the chart, but miners will surely sniff out another cheap source of electricity somewhere else in the world and set up shop there.
The electricity shortage adds to an already-stressed energy system in Iran. The country has struggled with blackouts in recent summers, due in part to low rainfall limiting hydropower and skyrocketing temperatures that increased the need for air conditioning. People staying at home due to the coronavirus have also tapped into more power; as the weather gets hotter, some medical centres say they’re now running out of power to properly store covid-19 vaccines at cold and even sub-zero temperatures.
In 2019, the Iranian government established a licensing process in an attempt to control the crypto industry, with requirements that miners register with the government and pay higher prices for electricity, but that did little to deter unregistered mining. In January, following rolling blackouts over a series of weeks, authorities cracked down on miners and shuttered what they said were 1,600 illegal mining operations, confiscating around 45,000 machines that officials say were consuming 95 megawatts of electricity each hour.
As crypto mining explodes around the world helped by soaring prices for bitcoin and other types of digital currencies, local and national governments — as well as the miners themselves — are struggling to figure out how to control the enormous energy use from mining operations. A county in Montana recently passed a first-of-its-kind requirement mandating crypto mining operations use renewable energy. Some experts have suggested regulating the market for mining machines as a way to impose controls on illegal mining operations. And popular currency Ethereum is planning to transition from a power-hungry proof-of-work model to proof-of-stake, which Ethereum’s founder called “a solution to the [environmental issues] of Bitcoin.”
The ban in Iran will take effect immediately and be in place until at least September, officials say, and will include legal as well as illegal operations.