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The future of Bitcoin mining is green, and Russia has the best chance

Last month, Chinese President Xi Jinping declared China’s plans to be carbon neutral by 2060, calling for a “green revolution.”

If the plan is implemented properly, it will help China to completely drop the status of the biggest pollution and significantly improve the global ecosystem, which could also seriously shake the country’s famous Bitcoin (BTC) mining industry.

China’s most famous mining center is the Southern province of Sichuan, which has a prosperous hydroelectricity sector. However, electricity there is only cheaper during the reading period, which takes place between May and September. Outside of that time, most miners were moving north to Xinjiang and Inner Mongolia, which currently make up more than 40% of the total Bitcoin hash rate. However, unlike Sichuan, desert regions are more dependent on immutable energy sources such as coal. If the government continues to push net-zero carbon dioxide emissions, mining there will be ineffective, and local players will be left with fewer options.

The future of Bitcoin mining is green

As the world finally learns the hard facts of climate change and man-made carbon dioxide emissions, having continued access to renewable energy will be one of the most important factors in Bitcoin mining . But are there locations that can meet this requirement?

Let’s take a look at the Bitcoin Mining Map which indicates a close estimate of the geographical distribution of the BTC global hash rate. China, of course, is the undefeated king, making up more than 65%. China is followed by the United States, Russia and Kazakhstan, which are neck and neck at 7.24%, 6.90% and 6.1

7%, respectively.

The Commonwealth of Independent States, or the CIS region, which includes both Russia and Kazakhstan, seems to have been largely ignored by international players, largely due to a lack of information about local mining scenes.

Me in North China, Kazakhstan’s electricity is produced by most power plants. It is cheap, but not sustainable. Also, the local government is disrupting the electricity market by lowering tariffs and costs, meaning they may return later.

Russia, on the other hand, has many natural requirements for cheap renewable electricity, as well as a more stable economic environment.

Rich in cold and energy

If you ask me to name something good in the Soviet Union, I would say industrial infrastructure.

Much of Bitcoin mining in Russia takes place in the famous Siberian region, which has also been the main site for aluminum production since 1960. Since energy was consumed in all stages of aluminum production, the USSR chose build Siberian smelters with hydropower plants (Russia supplies up to 9% of hydro resources worldwide, mostly in Siberia and the far east).

The technology smelting technology has changed since then, making production better. That, coupled with the fact that the Soviet government often leaves room for future growth when building infrastructures, is the main reason why the region has so much power in these times. According to RusHydro, the second largest hydroelectric power producer in the world, the total installed capacity of hydropower units in Russia is currently approximately 45 million kilowatts. More specifically, hydropower plants in Siberia are estimated to produce about 10% of the total output of all power plants controlled by the Unified National Energy Network.

Another key aspect is the popular climate of Siberia, where the nine months of the year are cold. If there is anything good for this type of weather, it hosts a datacenter stuffed with large ASIC units running at full capacity. Anyone who tries to run a mining rig at home during the summer will probably know what I mean.

China is an ally

Russia’s vicinity of China is also a big addition, as the best mining hardware is made there.

Historically, Moscow has had a strong economic relationship with Beijing, which continues to strengthen to this day. Shipping between the two countries is cheap, fast and consistent: Train and freight aircraft continue to operate despite the COVID-19 pandemic.

Now, imagine sending thousands of mining rigs to the state of Texas from Beijing, considering that the US is at war with China and slapped a hefty 25% tariff on imports mining equipment.

Related: China and the US must learn from each other and work with the CBDC

Affordable efficiency

Continuing comparison with the US, operating costs and capital expenditure costs of maintaining a data center is lower in Russia, largely because local labor and construction costs are cheaper.

Moreover, if your gig breaks down, you do not have to return it to China, wasting a few weeks (considered the age of Bitcoin mining). Facilities sized at the Russian institution tend to have in-house repair centers with technicians trained directly by leading Chinese mining hardware manufacturers, so that they can quickly revive everything.

Russia has been the third largest Bitcoin mining country in the world for quite some time now, and the local industry has grown significantly.

The regulation is clearer than you might think

Hearing all this for the first time, one could argue: But the Russian government has banned crypto. So, that is not true according to the truth. Let’s take a closer look at the country’s core crypto-related law, called “On Digital Financial Assets,” or DFA, which signed into law in July.

The bill prohibits Russian residents from paying in cryptocurrencies starting January 2021 but legally recognizing them as “digital financial assets.” It does not mention cryptocurrency mining in any form, meaning at present, there are no legal restrictions.

However, in early September, Russia’s Ministry of Finance proposed amending DFA law to prohibit miners from receiving crypto payments for their activities. As the authority said:

“Single crypto mining is legal, but it loses its financial value because payments are typically processed in Bitcoins and Ethers.”

While no one knows if the amendments will be approved, what they suggest is straightforward: Russians cannot sell the coins they mine, but they can legally host their hardware and other infrastructure for foreign players. Most likely, the change will affect mom-and-pop operations, as large miners are usually paid in fiat currency. Moreover, operations that clients are abroad can still be legally paid for in crypto from abroad even if the bill goes into effect.

Besides, regional authorities in Siberia are growing to be supported by large-scale mining operators because they pay taxes, create jobs, and put that extra energy. The truth is that the government is pro-business and has no interest in destroying something that contributes to the economy.

At this point, the government is already addressing all local large-scale mining operators mostly because the consumption of multiple megawatts of electricity is easily seen by the electric grid operator (and naturally requires some sort of explanation). Earlier in August, the Ministry of Digital Development, Communications and Mass Media published a bill that would establish additional control over data centers in Russia.

A skeptic will continue: But you will surely fail if you choose to mine in Russia. While doing business has never been a risk-free activity, especially when it comes to the cryptocurrency industry, there have actually been no reported cases of scams associated with crypto mining in Russia. Police regularly shut down illegal operations that steal electricity, but authorities never investigate the following operations that pay appropriate taxes and costs.

Surprisingly, most of the stories about inconsistent mining players come from North America, which is generally considered a highly controlled market. In fact, the region is full of corpses of mining companies that suddenly become bust or become scams, losing the money of investors in both cases.

The latest example is Toronto-based HyperBlock, which suddenly shut down a 20-megawatt data center in May, saying it had to stop operating due to the Bitcoin divide – despite the fact that it was a regular event that could prepare similarly Similarly, in early 2019, major crypto mining and US firm firm Giga Watt closed access and power to its facilities after allegedly failing to pay $ 300,000 to utility bill.

Is another mining boom coming soon?

Sure, Russia may use some clearer mining regulations (like most countries in the world), but this process is likely to take some time. The most important thing is that the government finally communicates the general behavior, which can be summarized in the following way: “We are skeptical about using cryptocurrencies as a means of payment, but good at related activities that stimulate our economy.”

As a result, Russians seem to be preparing for a mining boom similar to what happened in 2017. Local retailers recently reported a 49% increase in sales associated with the mining of crypto graphics cards in August, and GPU sales registered from June to August rose 470% compared to last year, so things are clearly heating up.

The views, opinions and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Igor Runets is the founder and CEO of BitRiver, the largest colocation service provider for Bitcoin mining in Russia and the CIS region. After completing his MBA from Stanford, Igor returned to Russia to use his more than 10 years of experience in enterprise-class data centers and Siberia’s hydroelectric power to bring Bitcoin mining with institutional level among investors around the world.

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