Thursday, March 4, 2021

Iranian crypto miners cry foul after electricity backlash Business and Economy news

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Tehran, Iran – An Iranian newspaper this week shamed government authorities for allowing cryptocurrency farms – especially Chinese-owned ones – to mine bitcoin in Iran.

“Burning public trust is even more dangerous than burning people’s money on Chinese cryptocurrency farms,” Jomhouri-e Eslami’s editorial read “Red Farms!”

The charges are not confined to a single newspaper. For two weeks, Iranian social media, state-affiliated media, and dozens of local and national officials spoke out on the topic of crypto farms, their electricity consumption, and mining’s alleged role in the deterioration of the country’s air quality.

But members of the crypto community are screaming scandal, claiming they are the scapegoat for Iran’s growing woes as it battles the Middle East’s worst COVID-19 crisis and the pandemic’s crushing financial blow and US economic sanctions.

Power outages and pollution

Crypto miners run powerful “farms” of computer equipment that compete within a global, decentralized computer network to verify transactions made with cryptocurrencies such as bitcoin.

In exchange for verifying “blocks” of transactions, miners are rewarded with new coins.

The benefits can be beautiful. Bitcoin, renowned for its volatility, hit a record high of nearly $ 42,000 on January 8, but has since fallen back to around $ 31,000.

But crypto mining requires a lot of electricity, which is subsidized in Iran, fueling accusations that crypto miners profit at the expense of the state.

The latest backlash against crypto mining comes as Iran’s sprawling capital Tehran has been shrouded in heavy smog for nearly a month. [File: Majid Asgaripour/WANA (West Asia News Agency) via Reuters]

Crypto advocates counter that these subsidies are not as generous for miners, who are forced to pay electricity export tariffs and can end up paying 10 times what other industries pay for electricity during periods of time. peak month.

The government and the public have also blamed crypto miners for the power outages across the country since 2019.

This latest backlash comes as Iran’s sprawling capital Tehran – home to over eight million people, rising to over 12 million when you add commuters – has been shrouded for most of a month in smog. intense which has spread to other cities in the country. country.

The deterioration in air quality has been attributed to power plants that burn mazut, a heavy, low-quality fuel oil that releases high levels of sulfur dioxide.

“We don’t want mazut to be consumed at all, but we have no other option,” Oil Minister Bijan Zanganeh admitted in early January, saying Iran’s mazut exports had been affected by US sanctions on the country’s oil industry.

Breathing toxic emissions directly contributes to 3,000 deaths in Tehran and 33,000 in Iran each year, according to the latest estimates from the Ministry of Health in 2018.

Over a five-day period in December, nearly 14,000 people across Iran were admitted to the emergency room due to pollution complications, according to Mojtaba Khaledi, spokesman for the Emergency Services Organization of Iran. Iran.

Iran’s power grid is under strain, which experts over the years have attributed to a range of fundamental problems ranging from poor management of power plants and old infrastructure that leads to wasted energy to high levels of gas consumption. exceptionally high by households.

Earlier this week, President Hassan Rouhani said Iran – which has the world’s second-largest natural gas reserve – consumes more natural gas than 14 European countries in colder climates combined.

Today, households in Tehran are also experiencing sporadic natural gas outages.

Crypto mining is currently the most money-ready industry in Iran.

Hamed Salehi, researcher in cryptocurrency and blockchain technologies

Industry lends money

Iran has the capacity to generate up to 83,000 megawatts (MW) of electricity at the moment, officials say.

But while a number of officials have blamed cryptocurrency mining for straining the power grid, others have contradicted this claim.

Iranian Energy Minister Reza Ardakanian said on Tuesday that the country’s electricity consumption peaks at 38,000 MW per day, while total consumption for cryptocurrency mining sits just above 300 MW.

“A simple mathematical calculation will tell you what fraction of that huge number it is,” he told reporters, warning to beware of factions who wish to take this opportunity to stir up trouble.

Hamed Salehi, a cryptocurrency and blockchain technology researcher, said the Energy Ministry’s lack of transparency on large crypto mining operations – including the amount of energy each consumed and the type of equipment they use – fuels disinformation and creates a less than welcoming climate for an industry that is not under the yoke of US sanctions.

“What is wrong if foreigners enter Iran, get all the official permits and invest money to even build electrical substations for their [cryptocurrency mining] farms? He asked Al Jazeera, adding: “It would be a victory for them, for the government and for the people.”

“Crypto mining is currently the most money-ready industry in Iran under sanctions and that’s while miners pay for their electricity at export tariffs,” Salehi said.

Although Jomhouri-e Eslami’s editorial criticized “red farms,” ​​there is only one crypto mining farm jointly owned by China in the country, Mostfa Rajabi Mashhadi said last week. -speak of the Iranian electricity industry.

The farm in question is managed by Iran & China Investment Development Group. On January 14, Iranian officials announced that, along with a number of other Iranian crypto farms, power would be cut for two weeks without notice.

Mohammad Hassan Ranjbar, CEO of Iran & China Investment Development Group, issued a statement condemning the movement and the hype around cryptocurrency mining.

“China is currently the only country that can invest in Iran because of the sanctions. It is both rich and rich in technology, so we can lay the groundwork for more investment by helping each other, ”he wrote, warning that China could transfer its activities to another country, given that bitcoin mining “is profitable all over the world” at its recent valuation.

“They don’t even need to build power substations, are supported by governments and people and are not sanctioned,” Ranjbar added.

China is currently the only country that can invest in Iran because of the sanctions.

Mohammad Hassan Ranjbar, CEO of the Iran and China Investment Development Group

Crackdown on illegal mining

It’s not just crypto farms operating above the board that are in the crosshairs.

President Rouhani’s chief of staff Mahmoud Vaezi, who previously served a four-year term as minister of information and communications technology, announced earlier this week that the intelligence ministry would start investigating the illegal cryptocurrency mining operations.

“It would also be wrong to say the government is using bitcorn,” he said, mispronouncing the name of the world’s largest cryptocurrency.

Mohammad Hassan Motevalizadeh, CEO of the state-owned power company Tavanir, said this week that 45,000 illegal mining devices using 100 MW per day were confiscated recently.

Illegal devices that have not been trapped are estimated to consume up to 300 MW per day, less than one percent of Iran’s peak electricity consumption.

It would be pointless to say that cryptocurrency mining is causing power outages in Iran with all evidence to the contrary, said a 30-year-old man who operates a legal farm with nearly 1,000 devices and has asked to stay anonymous due to sensitivities involved.

“The solution to solving the blackouts would be for officials and the Energy Ministry to develop infrastructure and methods of delivering electricity during peak hours,” he told Al Jazeera, adding that the expansion of solar and wind power plants would be a promising avenue.

“I agree that illegal farms should be dealt with,” said researcher Salehi.

“It tells foreigners not to come to Iran because something like that could happen to them at any time. And that falsely tells people that crypto mining is for profiteers who waste public resources.



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