Alireza Salavati, an economics expert, examines the benefits of bitcoin mining in Iran in a new note. He cites Iran’s energy resources, the issue of sanctions and the existence of two peaks of consumption per year as features that make Iran a good country in terms of bitcoin mining. Read his note below.
According to digital currency and to Quoted According to the Persian Independent, with the increase in the price of bitcoin to close to $ 40,000 and the consequent increase in the price of other cryptocurrencies, the cryptocurrency mining industry has flourished again. It is heard from all corners that one of the factors increasing the country’s electricity consumption is the use of grid electricity to extract bitcoins. Of course, with the rise in the price of bitcoin, the cost of purchasing its mining devices has also grown significantly. In Iran, however, due to the low price of energy in the country, old and obsolete devices are generally used. Hence, it is still economically viable to purchase these devices.
Why is cryptocurrency mining advantageous in Iran?
Iran’s advantage in the production and extraction of cryptocurrencies can be seen in three main parts:
1. Rich energy resources in the country
Iran is the fourth largest country in terms of oil resources (156 billion barrels of oil) and the second largest country in terms of gas resources (32 trillion cubic meters) in the world. In addition, given the state of the sun in Iran, it can be said that this country is a good source of solar energy. The sum of these conditions shows that Iran, as a country with abundant energy supply sources, has suitable conditions to supply the energy required for the extraction of cryptocurrencies.
۲. Iran sanction
Having rich energy resources is not a good reason for a country to become a bitcoin mining paradise. In addition to having vast energy resources, Iran is unable to export these resources due to international sanctions. Hence, there is a good opportunity to export energy through the extraction of cryptocurrencies. Iran can turn Iran into a cryptocurrency mining paradise by selling energy at lower prices to bitcoin miners in the country and allowing them to generate cheap electricity. The development of Ramzarz mining infrastructure can expand the country’s electricity network to several times the current situation and improve Iran’s situation in energy supply in the coming years.
3. There are two consumption peaks in the country
Iran is one of the few countries in the world that has two consumption peaks. In summer, due to very high electricity consumption, in order to cool buildings, the country’s electricity consumption increases to nearly 60,000 megawatts. On the other hand, in winter, due to the cold weather and the need to heat homes, gas consumption reaches records. Therefore, Iran is facing peak electricity consumption in summer and gas consumption in winter. The existence of two peaks leads to problems in energy exports. But extracting cryptocurrencies can solve this problem to a large extent. By creating bitcoin mining infrastructure, the country can move towards maximum use of the country’s production infrastructure by using cryptocurrency mining in times of declining electricity or gas consumption.
From opportunity to threatening
Despite the pristine opportunity to mine bitcoins in the country, this opportunity has become a major threat to government behavior. The very low price of industrial and agricultural electricity has led most people to use agricultural and industrial electricity to extract bitcoin. For this reason, they have shut down their manufacturing industries and turned to bitcoin mining. In fact, we are still seeing a major development opportunity turn into a major development threat
On the other hand, people who are willing to invest heavily in this industry are also very unmotivated by its legal extraction. By announcing a sharp rise in the price of electricity for bitcoin mining, the Iranian government has virtually destroyed the economic viability of its production.
The difference between bitcoin and cement
In a report published last year by Donya-e-Eqtesad newspaper, the government annually subsidizes the energy industry with about 9,000 billion tomans; If the total profit of cement companies has been about 1,500 billion tomans. If we divide the amount of energy subsidy on average among the employees of this industry, each person receives a monthly salary of about 37 thousand tomans. It should be noted that these assumptions were calculated last year in dollars, about 12 thousand tomans, and probably in the current situation, the numbers should be multiplied by 2. However, the government has not looked at the bitcoin mining industry as an industry and has made no effort to develop it.
Since bitcoin mining is as energy-intensive as other industries in the country, such as the production of cement, steel, and ceramic tiles, it seems that the fair energy price for bitcoin mining should be similar to the energy price for other energy-intensive industries. Of course, due to the limitations of the electricity distribution network, the government can limit the extraction of bitcoins to create new capacity, which in turn can transform the entire electricity industry in the country. Currently, the price of electricity for industries such as steel is about 250 tomans, which is equivalent to 1 cent. Increasing this figure to about 3 cents can reduce the energy rent of steel and be a suitable and attractive price for the development of Ramzarz mining infrastructure in the country.
A task that is not yet clear
Despite the passage of several years of the cryptocurrency industry in the world, the task of extracting cryptocurrencies in Iran is still unknown. It is not yet clear what the licensing process is, the exact price of electricity consumed by these units, and the price of gas in order to set up a power plant to generate the electricity needed to extract bitcoins and so on. The Iranian government, which is always faced with a decision-making crisis, this time as in the past can not make a clear decision on the extraction of cryptocurrencies. This has made things difficult for investors and the public. For this reason, bitcoin mining is mainly done underground.
Of course, there have been several directives to extract the cryptocurrencies, but the announcement of the sale of electricity or gas at a high price to bitcoin miners has effectively eroded Iran’s advantage in lower energy prices. In addition, excessive restrictions on bitcoin mining licensing have led investors to either effectively abandon bitcoin mining or move it forward illegally with the lights off. Even making bitcoin mining conditional on building a new power plant and supplying the gas it needed could be a good advantage for Iran, but it also seems to face extensive bureaucracy.
Opportunity that burned
Not only did Iran not welcome the extraction of cryptocurrencies and facilitate their trade during the embargo period, but, as in its past behavior, it stood firm in the face of the licensing process with extensive bureaucracy. In the current situation where Iran is facing many problems in energy exports, it could supply its surplus fuel at a competitive and cheaper price in the domestic market and thus achieve energy exports. Even burning fuel oil in uninhabited areas and providing the electricity needed by Ramzarz miners can reduce the fuel oil crisis in the country and lead illegal miners to cheap electricity to produce Ramzarz.