The global computing power of the bitcoin network has dropped sharply as Kazakhstan’s internet shutdown during a deadly riot has hit the country’s fast-growing cryptocurrency mining industry.

Kazakhstan last year became the world’s second-largest bitcoin mining hub after the United States, according to the Cambridge Center for Alternative Finance, after major hub China cracked down on cryptocurrency mining activity.

The Energy Ministry stated last year that non registered mining could be consuming up to 1.2 GWt of power, which together with the 600 MWt of “white” miners accounts for about 8% of Kazakhstan’s total generating capacity.

What happened in Kazakhstan?

The country’s uprising began with protests in western Kazakhstan against a fuel price hike on New Year’s Day.
Russia sent paratroopers to Kazakhstan on Thursday to help quell the countrywide uprising after violence spread across the tightly controlled former Soviet state. Police claimed they had killed dozens of rioters in the main city of Almaty, while state television said 13 members of the Security Forces had been killed.

The Internet was shut down across the country on Wednesday in what monitoring site Netblocks called a “nationwide Internet blackout.” The move would have prevented miners in Kazakhstan from accessing the bitcoin network.

How are bitcoins created?

Bitcoin and other cryptocurrencies are created or “mined” by high-powered computers, usually in data centers in different parts of the world, which compete to solve complex mathematical puzzles in an energy-intensive process.

In August last year, the most recent data available, Kazakhstan accounted for 18% of the global “hashrate”, cryptocurrency jargon for the amount of computing power used by computers connected to the bitcoin network.

In April, before China’s latest crackdown on bitcoin mining, the figure was just 8%.

The hashrate of major cryptocurrency mining pools – groups of miners in different locations who team up to produce bitcoin – including AntPool and F2Pool, was on Thursday at 12:15 GMT around 14% below its Tuesday level, according to data from mining firm BTC.com.

The more miners in the network, the greater the amount of computing power needed to mine new bitcoins. Kazakhstan’s cryptocurrency mining farms are mainly powered by aging coal plants which, along with the coal mines and entire cities built around them, are a headache for the authorities as they seek to decarbonize the economy.

The Kazakh government indicated last year that it planned to crack down first on unregistered “gray” miners who, according to its estimates, could be consuming twice as much energy as “white” or officially registered miners.

Was it just the hashrate drop due to Kazakhstan’s problems?

The hashrate drops if miners leave the network, which in theory makes it easier for the remaining miners to produce new coins. However, a drop in the hashrate is not necessarily an essential element for the bitcoin price.

Bitcoin fell below $43,000 on Thursday, testing multi-month lows after investor appetite for riskier assets fell as the U.S. Federal Reserve leaned toward more aggressive policy action by raising interest rates.

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