As an analyst with over two decades of experience in studying global economies and energy markets, I find Ukraine’s cryptocurrency mining landscape to be both intriguing and concerning. On one hand, it is fascinating to witness a country harnessing its resources for a burgeoning industry that could potentially bring significant economic benefits post-war. On the other hand, the current situation with power outages and imperfect legislation raises serious questions about the sustainability and ethical implications of this activity during times of conflict.
It’s worth noting that Ukraine continues to rank high in global cryptocurrency usage. Let me shed some light on the mining operations within the country amidst the ongoing conflict with Russia:
At the OSINT agency Molfar, analysts gathered data spanning from July 2023 to June 2024, utilizing diverse open resources such as stored records and mining pool hash rates. After analyzing this data, they calculated the typical monthly hashrate.
The study found three active mining pools with six miners in Ukraine, which likely consumed 33 kW per hour. Also, from the resource asictrade.com, 146 types of miners (mining systems) are known.
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How much Electricity do mining farms consume in Ukraine?
In April, Ukrainian miners were found to be using an average of 616 Megawatts (MW) every hour, while their consumption dropped slightly to 487 MW per hour in May. A steel mill’s power usage can range from 200 MW up to a maximum of 1,000 MW per hour, depending on its output levels.
In April and May of 2024, electricity usage by Ukrainian miners matched or surpassed the consumption levels of major industrial companies, which might come as a surprise given that cryptocurrency mining is still a relatively young sector.
In the year 2023, Ukraine’s overall electricity usage averaged approximately 15 gigawatts every hour. Simultaneously, there was a shortage of 9 gigawatts. Come March 2024, roughly 6.7% of the nation’s total electricity consumption was being used by miners.
Compared to worldwide usage, the amount of electricity used by Ukrainian miners in March 2024 is quite modest. For instance, American miners use around 8-10 gigawatts (GW) of power every hour. Therefore, the electricity consumption by Ukrainian miners was only about 10% of what U.S. miners consumed.
In warmer months like June and August, the hash rate and power consumption tend to drop due to an uptick in cooling expenses for mining equipment. This reduction in profitability leads to fewer individuals participating in mining activities.
Bitcoin mining and household electricity consumption
The average cost of electricity required to mine one Bitcoin (BTC) is $46,291. On the market, its price at the beginning of September was $58,000 at the time of the study. Costs and profits will vary in different regions of the world.
Producing a single Bitcoin requires approximately 110,000 kilowatt-hours (kWh) of energy. This total network consumption is estimated to be around 176.02 terawatt-hours (TWh) per year. Given the electricity prices for consumers in Ukraine, the cost of a single Bitcoin would amount to approximately $12,540.
Indeed, the calculations here don’t factor in additional costs like acquiring and maintaining equipment, which also experience devaluation over time.
Estimation of electricity consumption by miners and infrastructure
Based on the research findings, it’s revealed that the typical electricity usage by miners from April to June was comparable to the power requirements of approximately 658 hospitals, over 3.5 million units of street lighting, more than 36,000 retail stores, and even surpassing the consumption of half a million air conditioners.
Furthermore, the amount of energy used by miners is sufficient to power some of Ukraine’s biggest cities for multiple days.
As a researcher, I found that the daily electricity consumption by miners (approximately 9052 MW) could sustain these cities, Kyiv and Dnipro, without any power outages for approximately 3.89 days. In other words, one day of mining operations equates to four days of uninterrupted power supply in both cities.
In a discussion with crypto.news, Maksym Zrazhevskyi, Research Head at OSINT agency Molfar, points out that the energy usage of cryptocurrency miners has a substantial impact on Ukraine’s infrastructure operations. During peak hours when the nation’s population demand for electricity is highest, the energy consumption by miners becomes particularly detrimental.
In other words, it’s concerning that cryptocurrency mining may be adversely impacting our nation, as their estimated energy usage is roughly equivalent to that used by around 770 hospitals – essential institutions which we heavily rely on especially during times of conflict.
If the circumstances for generating power and legal mining operations improve after the war, mining could indeed prove beneficial for post-war Ukraine.
Legal status of crypto in Ukraine
Beginning in February 2022, President Volodymyr Zelensky of Ukraine enacted a law regarding virtual assets. Under this new legislation, the National Securities and Stock Market Commission will oversee the cryptocurrency market. It’s important to note that mining, which involves using equipment to acquire digital assets, is not outlawed in Ukraine.
As for crypto regulation in Ukraine, it’s still under development. Notably, a reform plan was approved by the Ukrainian government this March as part of the Ukraine Facility program, which allows them to receive €50 billion from the EU between 2024 and 2027. This plan includes guidelines for the cryptocurrency market among other aspects.
To address unlawful actions, it’s crucial for the government to revise the applicable legislation concerning digital assets, ensuring they align with MiCA (Markets in Crypto-Assets) regulations and implementing a tax system suitable for the cryptocurrency market.
During the ongoing conflict with Russia, there has been a significant increase in the use of cryptocurrencies in Ukraine, as they offer an effective method for collecting charitable donations aimed at supporting the country’s military forces.
Prospects and difficulties in developing mining in Ukraine
Analysts observe that the ongoing conflict with Russia has made the situation for cryptocurrency mining more challenging. Initially, there were plans to establish mining facilities near nuclear power stations with a capacity of 2-3 GW by the end of 2021. However, as we approach 2024, these plans now seem almost unrealistic or outdated.
“The current state of Ukraine’s energy system raises questions about the profitability of this industry. We see that the electricity costs for mining are generally much higher than the energy limits provided to cities like Dnipro and Kyiv. However, miners could theoretically solve this problem using solar or wind power plants.”
As a researcher, I am optimistic about the potential for mining development in the country, given the strong interest Ukrainians have shown in cryptocurrencies. It’s evident that they frequently opt for cryptocurrency as a safeguard for their savings. Moreover, the relatively low cost of electricity in the country makes it an appealing destination for mining operations.
Ukrainians are currently quite engaged in the realm of cryptocurrencies, and given its affordable electricity, Ukraine holds great potential to emerge as a significant global hub for cryptocurrencies. However, at present, the primary challenges in Ukraine include power failures and less-than-ideal legislation.
Meanwhile, regarding legislative measures, proposals are currently being discussed in Ukraine that aim to establish regulations for the cryptocurrency market down the line, encompassing mining activities as well. This was his final point.
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2024-09-18 17:58