For the second time this year, the Islamic Republic of Iran has banned the mining of bitcoin and other cryptocurrencies in an effort to ease pressure on its crumbling energy infrastructure.
Bitcoin miners deploy power-hungry computer hardware in a race to randomly find – or mine – a specific string of numbers required by the network to create new blocks of data. The reward for going through trillions of wrong guesses is the newly minted bitcoin; Cost is the electricity required to keep the machines powered off.
Tehran is not ideologically opposed to the activity: The Ministry of Industry, Mining and Trade has issued over 1,000 licenses to crypto mining farms, viewing them as a potentially attractive source of income.
However, after decades of US sanctions, Iran’s infrastructure is suffering from chronic investments.
Blackouts in the summer were a regular occurrence as Iranians crank up their air conditioners, prompting President Hassan Rouhani to announce a four-month ban on crypto mining. With winter now knocking across the country and heating equipment burning, the government is once again forced to act.
Mustafa Rajabi Mashhadi, director of the state-run Iran Grid Management Corporation, told state TV that the latest sanctions – effective until March – 209 MW should be freed up for Iranian families,
He said the Islamic Republic would also crack down on unlicensed miners, who are believed to consume three times more energy than their law-abiding counterparts. Other, more traditional energy-saving measures – such as turning off street lights and reducing office consumption – are also on the cards.
Taken at face value, it is hard to blame the government for targeting non-essential consumption like bitcoin mining.
However, beyond easing demand for a short period of time, the measure will do little to address structural problems with Iran’s creaking energy network. Conversely, it would prevent investment by only one of the few sectors that is ready and willing – with or without restrictions – to end the blackout by helping the country transition towards reliable, sustainable and cost-effective renewable energy.
Iran has made no secret of its desire to go green.
Country In 2019, 98% of its energy was generated from natural gas and oilAccording to data collected by the International Energy Agency (IEA).
In October, the Ministry of Power, the Renewable Energy and Energy Efficiency Organization (SATBA), tried to reduce its reliance on fossil fuels by inviting the private sector to help. To develop and build renewable power plants with a total capacity of 10,000 MW,
But the problem before Iran- In addition to the ever-present danger of imposing sanctions – is that achieving this goal requires foreign expertise, heavy capital expenditure and a willingness to accept short-term financial uncertainty. This is because building a power plant is only part of the solution. A major challenge is accessing electricity from remote areas where renewable energy is typically delivered to every village, town and city in the vast country.
Whenever this is not possible with existing infrastructure – and whenever a temporary reduction in demand creates a surplus of production capacity – Iran will fall victim to it. ‘Stranded electricity problem’ Alex Gladstein, chief strategy officer of the Human Rights Foundation, recently described in an essay for Bitcoin Magazine.
Regarding the challenges faced by developing countries around the world, he said, “In order to grow their economies, they have to expand their electrical infrastructure. But when they … When building power plants to catch up, that power often has nowhere to go.”
One solution is the activity that Iran has now severely sanctioned. “Bitcoin can be an incentive game-changer,” Gladstein explained. “New power plants, no matter how remote, can generate immediate revenue, even without a transmission line, by directing their energy to the bitcoin network and diverting sunlight, water or air into money. In … with bitcoin, any excess energy can be directed to mining until the communities around the plant take hold.”
Put another way, Iran can reduce the financial and logistical constraints of the Green Revolution by simply buying a few miners and commissioning its new power plants whenever they have excess energy.
This will guarantee a stable return on investment regardless of local conditions. What’s more, bitcoins mined by mining farms can be immediately sold for US dollars, digital gold or any other hard asset the government wants in its reserves. There is no need to hold any cryptocurrency longer than the split second it takes to sell.
Iran is not the only country that would benefit from taking such a stand.
In East Africa, a lobby group called Project Mano is encouraging the Ethiopian government to mine bitcoin with surplus energy already generated in its mature network of hydro, wind and solar power plants. In El Salvador, President Nayib Bukele has committed Bitcoin mining on a large scale using geothermal energy from volcanoes,
As always, developed countries have had a good start. In the US, private enterprise across the country – from New York To montana To Texas Already taking advantage of the ease and financial stability of mining bitcoins with green energy.
The difference for Iran, of course, is that it needs funding and partners to build its renewable infrastructure from scratch.
Bitcoin miners will be an ally – not an enemy – in that journey.