It is estimated that Iran has already taken 4.5 percent of the Bitcoin hashrate. According to a new study, Iran is partially replacing oil exports with Bitcoin mining.
Bitcoin is known to be a financial network that is difficult to censor due to its decentralization. As a result, the No. 1 cryptocurrency also offers those who are encapsulated from the international financial system a means of transferring values. Iranian miners have been taking advantage of Bitcoin’s censorship resistance since October 2020. The blockchain analysis and compliance company Elliptic has now tried to put the success of the Iranian Bitcoin mining program in numbers.
Make (digital) gold out of oil
The US sanctions have put Iran’s oil business and thus the country’s most important industry in dire straits over the past decade. The crude oil exports had slumped and because of Iran remained seated on his oil, production was severely throttled. But according to the Elliptic study, the Iranian government has now found a new way – or rather a detour – to monetize the country’s rich oil reserves: Bitcoin.
Iran currently burns around 10 million barrels of crude oil a year for “digging” for digital gold, estimates Elliptic co-founder Tom Robinson Blog post. That corresponds to four percent of Iranian oil exports, which have been increasing again since the second half of 2020. The estimate is based on information from the Iranian government from April 2020, according to which the electricity consumption for Bitcoin mining in the country was between 500 and 600 megawatts at that time. From this, Robinson derives a share of 4.5 percent of the total hashrate of the Bitcoin network. Bitcoin mining brings Iran an estimated $ 1 billion, the blockchain analyst calculates.
Growing influence from China
There seems to be a growing influence of Chinese companies in the Iranian mining sector. Like the London-based Iran news portal Iran International reports, Chinese mining farms in the south-west of the country in particular are making a profit because they can import their own ASICs.
Bitcoin mining is a high energy consumption business, but the government charges bitcoin miners the same rate it exports energy to other countries. This is not economical for anyone, except for the Chinese Bitcoin miners who import their own machines,
Iran International quotes a miner. In addition, according to reports, there is a 175 MW Chinese mining farm in the south of the country, which is operated in collaboration with “a military organization”. As a result, this farm pays lower electricity prices.
Iran’s government is putting the reins on Bitcoin mining
Further reports contradict the narrative that the Iranian government is actively using Bitcoin mining to circumvent US sanctions. A large part of the Bitcoin in Iran is mined “black”. A government spokesman puts the proportion of illegal mining operations at 87 percent. Only 200 MW of the meanwhile 1,500 MW that Iran spends on mining are therefore burned in licensed mining farms. According to other estimates, the values are 300 MW and 2,000 MW respectively. Illegal mining operations are said to have been in the country for nationwide power outages have taken care of.
Therefore, the Iranian government is taking a tough line against illegal mining operations. In addition, the government is anything but generous when it comes to licensing. Between November 2019 and January 2021, only 16 of 1,870 applications received approval, reported Iran International. The licensed companies must now also face the consequences. As reported by the Iranian news agency ISNA, they should use the Electricity can be turned off. The view that the Iranian government in particular is behind the mining boom in Iran can hardly be upheld.