The expansion of Bitcoin mining in Abkhazia leaves the small Caucasian country on the verge of a major electrical collapse.
The small country of Abkhazia, located in Eurasia and whose main and practically only trading partner is Russia, faces an energy problem. The presumed culprits of this would be those engaged in Bitcoin mining, which leaves the country in the midst of frequent blackouts.
Abkhazia is a small nation of about 250,000 inhabitants and has a close strategic relationship with Russia. In fact, during the 2008 war, Georgia launched a military aggression against Abkhazia and South Ossetia, which received a very harsh response from the Russian army.
Since then, these countries enjoy an independent status and are protected with the entire arsenal of their powerful neighbor. The policies regarding electricity costs in Abkhazia, on the other hand, attract more and more people to the digital mining business.
Illegal Bitcoin Machine mining proliferates in Abkhazia
To what extent does Bitcoin mining leave Abkhazia without power?
The frequency of blackouts and the durability of blackouts in Abkhazia, could have their responsible. According to sectors in that country, it’s the Bitcoin mining business that leaves the main cities of that Caucasian nation in the dark.
There are two factors that push the miners to install their farms in the small nation. The first is the already mentioned low cost of services, especially electricity. The second is the low price of rent. It should be noted that most of the country’s professionals migrate to Russia, which has lowered the demand for rents.
It is important to emphasize that this country, having been born from a war, is not recognized by a wide range of nations. This has caused investors to avoid entering the country. In this way, the electrical service is obsolete and the main source of electricity, the Inguri plant, barely suffices for a domestic consumption that is on the rise.
The Inguri hydroelectric plant is the main source of energy in Abkhazia, however, it cannot keep up with the growth of Bitcoin mining. Source: Inguri hydroelectric power plant is the main source of energy in Abkhazia, however, it cannot cope with the growth of Bitcoin mining.
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Chaotic development of the crypto-currency business
In connection with this, the Abkhazian Minister of Economy, during an executive meeting, pointed directly at the Bitcoin mining. Among other statements she said that „since 2016 the mining activities of the cryptosystems have started to develop within the republic in a chaotic way“.
In this sense, he emphasized that „the lack of legal regulations that govern this activity has led to an uncontrolled consumption of electricity.
A fact that could worsen the energy crisis in Abkhazia is that, in February 2021, the aforementioned Inguri power plant will be closed. It dates back to the Soviet era, and therefore the government will undertake a series of actions to maintain and modernize it. Therefore, it is expected that the blackouts will be more drastic.
Another factor that endangers the economic equilibrium of the small country is that the energy deficit forces the authorities to buy electricity from Russia. Often, the purchase from its neighbor, is transated at prices higher than Abkhazia’s domestic rates reported Sputnik.
Bitcoin’s mining business, which leaves Abkhazia without power, could be consuming between 40 and 120 million kilowatts per hour.
Laws that have not served
The alarming situation caused the authorities to ban Bitcoin mining in Abkhazia in 2018. The related laws, however, left loopholes that allowed the miners to seek dozens of legal excuses to continue their operations, Sputnik explains.
As a result, farms continued to proliferate and punishment has been virtually non-existent. Later, mining was legalized when a party more open to new technologies came to power.
The novelty is that electricity rates for miners multiplied. However, this was not enough. The electricity companies, as a consequence, have been forced to impose electricity rationing on the population, which has generated discontent.
Data to take into consideration
According to studies by the Abkhazian government, there are about 150 large Bitcoin mining farms in the country.
To cover the energy deficit, the authorities buy electricity from Russia at high costs.
The government itself has blamed the miners for the current crisis that threatens to collapse the nation’s electricity system.