Iran: the next great Bitcoin mining hub?

Iran may be on the verge of legitimizing cryptocurrency mining in the country as an official industry, as the Economic Commission of Iran has finalized the power tariffs for cryptocurrency mining – which is now awaiting cabinet approval. The move has the potential to be a game changer for the cryptocurrency mining landscape, where China has been dominating the field so far.

Low costs

By the end of last year (2018), reports already started surfacing that Iran could become the next hotspot for Bitcoin mining. With a cost of electricity as low as $0.006 per kilowatt-hour, very few of the currently popular areas for Bitcoin mining are able to compete. Even in the province of Sichuan in China, where power tariffs drop significantly during the wet season in summer, the cost of electricity doesn’t go below $0.02 per kilowatt-hour. This difference only increases during the dry season in winter, when the Sichuan grid requires more coal-based energy, which can easily cause power tariffs to double up. For this reason, some miners were already making the move to Iran, as illustrated by one Chengdu-based miner migrating 2,000 devices.

Entry barriers

What has stopped miners, however, from migrating en masse is the (up until now) hostile attitude of Iran towards Bitcoin mining. The Iranian Islamic Revolutionary Guard Corps would detain and confiscate shipments of miners, making it hard for mining companies to set up shop inside Iran. Even as recent as last month (June 2019) Iranian authorities seized 1,000 mining devices that were being used to mine Bitcoin in two abandoned factories.

Current mining activity

The fact that 1,000 machines were seized in Iran does show that authorities are not entirely effective at stopping mining machines from getting into the country in the first place. One person estimated specifically that Iran is already hosting around 148,000 mining devices in total, despite the government crackdown. It has been reported that even government buildings and mosques have been used to host these devices. Pictures of mosques filled with mining devices have been floating around on social media, and it was explained that “mosques receive free energy in Iran” – making them extra attractive as a mining location.

Obviously, how many mining devices are really active in Iran remains anyone’s guess. Given the circumstances mining operations in Iran have plenty of incentive to try and operate under the radar. There’s, however, reason to belief the number of active mining devices in Iran exceeds 148,000. A spokesman for the Tadvin Electricity Company, Mostafa Rajabi Mashhad, told state TV “electricity consumption in the country jumped by 7% in the month ending June 21” compared to the previous year. This surge was blamed on cryptominers. Given that Iran consumes 253 terawatt-hours of electrical energy per year, this jump would equal an annualized 17.7 terawatt-hours. Assuming 1,500 (Antminer S9) to 2,100 watts (Antminer S17) per mining device, this spike could only be caused by 0.9 to 1.3 million mining devices in total. These devices would make up for a quarter of the total network’s energy consumption at this time.

Big shift

While these numbers are speculative, they are in stark contrast with the finding that China was still the biggest Bitcoin mining hub in the Asia Pacific area by the end of last year. Then again, a lot has changed since. The network’s computational power initially dropped from about 54 exahashes per second to a low of 35 exahashes per second, only to climb back up again to roughly 65 exahashes per second currently. Assuming 15 (Antminer S9) to 55 (Antminer S17) terahashes per second of computational power per device, this means that between 0.5 and 2 million mining devices have been exiting and (re-)entering the market. Noteworthy is also that most of the increase happened after it was announced in April that China was considering a ban on Bitcoin mining operations. But whether or not a big shift in mining locations has already happened, this increasing hostility towards miners by the Chinese government is bound to push them elsewhere. And now that Iran may actually become more friendly towards Bitcoin mining, the country may also just become the new favorite cryptocurrency mining destination.

Environmental impact

Needless to add, this migration wouldn’t bode well for the environment. Even though energy from the Southwest of China is far from “green”, it is still cleaner than the energy available in Iran. Energy in Iran is primarily (over 90%) fueled by oil and natural gas. As such, the carbon intensity of electricity bought in Iran easily exceeds twice the carbon intensity of electricity bought in Sichuan, China. Bitcoin’s already insane carbon footprint of around 290 kilograms of CO2 per single transaction (equivalent to that of 72k emails, 1.44M google searches, 120k hours of watching youtube, or flying a full boeing 747-400 for 8.5 KM) might therefore continue to reach even crazier heights.