Where should cryptocurrency miners go in such a changing landscape?

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

Although mining as a type of financial activity has not disappeared and is unlikely to disappear, Chinese cryptocurrency miners had to find a new place to settle. Many of them moved to the United States—the new global mining mecca—while others went to Scandinavia and still others to nearby Kazakhstan, with its cheap electricity.

Mining activities cannot go unnoticed forever, and governments around the world have become concerned about power capacity and supply outages.

Erik Thedéen, Vice President of the European Securities and Markets Authority, who is also Director General of the Swedish Financial Supervisory Authority, has called for the mining of proof-of-work protocol cryptocurrencies such as Bitcoin (BTC) to be banned 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 favorable – to mine cryptocurrency?”

North America

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

Philip Salter, CEO of cryptocurrency mining company Genesis Digital Assets, explained to Cointelegraph why the state became a popular destination for miners:

“The hottest location for miners around the world may be Texas right now. Its huge amounts of wind and solar power are causing a surplus of affordable energy. Privately owned power grids ensure a fast track for new projects, unhindered by slow bureaucracy. However, Texas benefits are not so new. The miners started building there years ago, though not as aggressively as now.”

Texas has experienced its own problems with electrical infrastructure, with massive blackouts hitting much of the state in 2021 amid unseasonable winter storms. But miners there have been relatively understanding about electricity consumption, with large companies even periodically shutting down equipment to prioritize residential consumers and critical infrastructure.

The United States’ neighbor to the north, Canada, has also been actively attracting mining companies. Recently, Alberta authorities invited cryptocurrency miners to the province, touting its cheap electricity prices thanks to the abundance of local natural gas.

Latin America

Latin American countries have made a considerable effort to attract miners, and El Salvador, in particular, has shown a favorable attitude towards mining. The country was the first in the world to recognize Bitcoin as legal tender. The Salvadoran government has not hesitated to invest directly in Bitcoin and even plans to build a city dedicated to the predominant cryptocurrency in which the electricity to mine BTC will reportedly come from geothermal plants fueled by volcanoes.

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

Large cryptocurrency companies have also started to settle 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 with miners until the government recently decided to cut subsidies to miners and increase taxes on mining activities. Until now, these changes in the financial policy for mining are limited to the province of Tierra del Fuego, known for its cold climate. However, Argentina remains a good place for mining operations, even after the rise in the price of electricity, taking into account the energy crisis in competing regions such as Europe.

Mining is still possible in Europe

Cryptocurrency mining operations in Europe remain relatively limited, as high electricity prices amid the energy crisis and a generally skeptical attitude towards cryptocurrencies on the part of regulators make crypto companies think twice. times before settling on the mainland.

In fact, The Nordic nation of Iceland was previously a hot spot for Bitcoin mining, with its subarctic volcanic landscape providing cheap electricity and low cooling costs for mining farms.

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

However, late last year, the country’s national power company, Landsvirkjun, cut the amount of power it would supply to energy-intensive industries such as Bitcoin mining and aluminum smelting, citing capacity issues.

Despite the constraints on the continent, there are some places in Europe where miners have decided to settle and where geography and climate are an important factor in attracting business.

in Georgia, Located in the Caucasus region, the large number of hydroelectric power plants built during the country’s time as a Soviet republic—along with its relatively modest population—have provided plenty of cheap electricity for miners.

Major cryptocurrency mining companies have already established their operations in the country. Back in 2014, the Dutch mining company Bitfury opened its first data center, with a draw of 20 megawatts, in the eastern Georgian city of Gori.

The success of Bitfury opened the eyes of many Georgians who began to actively purchase powerful video cards and create their own small cryptocurrency mining farms.. According to the World Bank, 5% of the Georgian population was engaged in crypto mining in 2018.

Also keep in mind that Russia remains an epicenter for cryptocurrency mining thanks to low energy costs and a cold climate.

Andrei Loboda, director of public relations for BitRiver—the largest provider of cryptocurrency mining placement services in Russia—shared with Cointelegraph some specific regions where miners will find it convenient to work if the Russian government is more supportive of cryptocurrencies:

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

Is mining worth it?

Geography is a critical element for miners to consider, whether it be electricity and cooling costs or regulatory concerns. However, there are some expenses, such as hardware, that miners will carry with them wherever they go.

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

A homemade Bitcoin mining rig with GPU. Source: BitcoinWiki.

2021 was the most profitable year for mining Ether (ETH) with graphic processing units since 2016. This is not surprising, since the price of Ether quadrupled last year. But the main problem for miners is the cost of electricity and equipment, and the price of the latter is growing rapidly.

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

The mining difficulty of the Bitcoin network recently reached an all-time high despite the sharp decline in the price of BTC in January, which reached a monthly low of about $34,300.

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

There are a multitude of changing factors that miners have to take into account, but one thing is clear: cryptocurrency mining is a flexible and adaptable industry, and companies have shown that they are willing to move to more profitable locations should the need arise. the current one is not ideal.

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