Panic as Kosovo pulls the plug on its energy-guzzling bitcoin miners | Cryptocurrencies

For bit­coin enthu­si­asts in Koso­vo with a breezy atti­tude to risk, it has been a good week to strike a deal on com­put­er equip­ment that can cre­ate, or “mine”, the cryptocurrency.

From Face­book to Telegram, new posts in the region’s online cryp­to groups became dom­i­nat­ed by dis­mayed Koso­vans attempt­ing to sell off their min­ing equip­ment – often at knock­down prices.

“There’s a lot of pan­ic and they’re sell­ing it or try­ing to move it to neigh­bour­ing coun­tries,” said cryp­toKapo, a cryp­to investor and admin­is­tra­tor of some of the region’s largest online cryp­to communities.

The fre­net­ic social media action fol­lows an end-of-year announce­ment by Kosovo’s gov­ern­ment of an imme­di­ate, albeit tem­po­rary, ban on all cryp­to min­ing activ­i­ty as part of emer­gency mea­sures to ease a crip­pling ener­gy crisis.

Bit­coin and oth­er cryp­tocur­ren­cies are cre­at­ed or “mined” by high-pow­ered com­put­ers that com­pete to solve com­plex math­e­mat­i­cal puz­zles in what is a high­ly ener­gy-inten­sive process that rewards peo­ple based on the amount of com­put­ing pow­er they provide.

The incen­tive to get into the min­ing game in Koso­vo, one of Europe’s poor­est coun­tries, is obvi­ous. The cryp­tocur­ren­cy cur­rent­ly trades at more than £31,500 a bit­coin, while Koso­vo has the cheap­est ener­gy prices in Europe due in part to more than 90% of the domes­tic ener­gy pro­duc­tion com­ing from burn­ing the country’s rich reserves of lig­nite, a low-grade coal, and fuel bills being sub­sidised by the government.

The largest-scale cryp­to min­ing is thought to be tak­ing place in the north of the coun­try, where the Serb-major­i­ty pop­u­la­tion refuse to recog­nise Koso­vo as an inde­pen­dent state and have con­se­quent­ly not paid for elec­tric­i­ty for more than two decades.

There is seri­ous mon­ey to be made – and in a time of ready ener­gy sup­ply it was being made. The num­ber of peo­ple min­ing cryp­tocur­ren­cies in Koso­vo is thought to have sky­rock­et­ed in recent years. Groups such as Alban­ian Cryp­to Ama­teurs on Face­book and Cryp­to Eagles on Telegram have explod­ed with thou­sands of new mem­bers, though it is unclear how many are min­ing cryp­tocur­ren­cy, or on what scale.

But the good times appear to be over – at least for now – and the devel­op­ments in Koso­vo high­light one of the big ques­tions about the future of bit­coin and oth­er such dig­i­tal currency.

The lat­est cal­cu­la­tion from Cam­bridge University’s bit­coin elec­tric­i­ty con­sump­tion index sug­gests that glob­al bit­coin min­ing con­sumes 125.96 ter­awatt hours a year of elec­tric­i­ty, putting its con­sump­tion above Nor­way (122.2 TWh), Argenti­na (121 TWh), the Nether­lands (108.8 TWh) and the Unit­ed Arab Emi­rates (113.20 TWh).

Mean­while, Koso­vans spent the final days of 2021 in dark­ness as domes­tic and inter­na­tion­al fac­tors com­bined to cause ener­gy short­ages and rolling black­outs across the coun­try. At the peak of the recent cri­sis, an unfore­seen shut­down at one of its two age­ing pow­er plants left Koso­vo import­ing about 40% of its ener­gy on inter­na­tion­al mar­kets – where prices have soared – and the gov­ern­ment was forced to pro­vide an emer­gency sub­sidy to help meet the costs.

Kosovo’s min­is­ter of econ­o­my, Dr Artane Riz­vanol­li, said the ban had been a “no-brain­er”.

“We have allo­cat­ed €20m for sub­si­dis­ing ener­gy, which is prob­a­bly not going to be suf­fi­cient, and this is tax­pay­ers’ mon­ey that is going to sub­sidise elec­tric­i­ty con­sump­tion,” she said. “On the oth­er hand we have cryp­to min­ing, which is a high­ly ener­gy-inten­sive activ­i­ty and is not regulated.”

Koso­vo is not alone. Last Sep­tem­ber, the 10 most pow­er­ful reg­u­la­tors in Chi­na vowed to kill off what was then the world’s biggest cryp­tocur­ren­cy min­ing industry.

In Ice­land, the country’s nation­al pow­er com­pa­ny, Landsvirkjun, has said it will turn away poten­tial cryp­tocur­ren­cy min­ers as the coun­try is expe­ri­enc­ing pow­er short­ages. Last week, a pow­er­ful com­mit­tee in the US Con­gress announced it would con­vene a hear­ing on the issue. US cryp­tocur­ren­cy min­ers are believed to be the largest con­sumers of ener­gy, fol­lowed by Kaza­khstan and the Russ­ian Federation.

“It’s time to under­stand and address the steep ener­gy and envi­ron­men­tal impacts it is hav­ing on our com­mu­ni­ties and our plan­et,” said com­mit­tee chair­man Frank Pal­lone and Diana DeGette, who heads its over­sight panel.

Alex de Vries, a Paris-based econ­o­mist, said his ini­tial esti­mates in a paper to be pub­lished lat­er this year sug­gest just a quar­ter of the ener­gy used by min­ers is renew­able: “The ques­tion real­ly is: what are you get­ting in return for that?”

Jason Deane, chief bit­coin ana­lyst at Quan­tum Eco­nom­ics, said he believed there were a host of advan­tages, includ­ing the offer of instant, vir­tu­al­ly free, finan­cial trans­ac­tions car­ried out with­out the use of a third par­ty, with cer­tain­ty that there will be instant set­tle­ment, and that the cur­rent teething prob­lems need to be put in perspective.