Iran’s Ridiculously Cheap Electricity Attracting Bitcoin Miners
Iran is attracting a growing number of bitcoin miners due to its cheap electricity, which has been said sometimes to reach lows of $0.0006 per kilowatt-hour.
Reports have surfaced of miners shutting shop or dumping their mining rigs (particularly in China) due to the unreasonably high costs of mining and a decline in BTC prices- ostensibly meaning that most miners operate at a loss or cannot recover their capex.
In one report, the Scandinavian countries are seen as one of the best destinations due to their cheap electricity and crypto-friendly environments; even though Norway recently scrapped electricity tax subsidies for miners raising power costs from $0.00056 per kilowatt-hour to $0.019.
As it turns out then, at $0.0006, Iran could offer the cheap power miners need, though setting shop in the country remains the most significant hurdle a potential miner would need to navigate.
According to local miner accounts, investors from Spain, France, Ukraine, and Armenia have visited mining farms in Iran with the aim of exploiting the cheap energy on offer.
Tehran-based blockchain researcher Nima Dehqan further disclosed that a local startup Areatak recently signed an agreement with a Spanish investor looking to set up mining farms in the country.
Dehqan said that although electricity costs in Iran have tended to be very low, the devaluation of the country’s rial, mostly due to the impact of U.S sanctions, means that the available opportunities have become even more alluring.
The Chinese connection
Chinese miners were said to have dumped thousands of mining equipment on the streets- now sold as secondhand rigs- in the wake of considerable losses.
Now evidence shows that a good number of these “battered miners” are likely to end in Iran. China, which according to a Coinshares report controls 60 percent of mining, offers cheap renewable energy.
However, it can be a bit higher compared to what is on offer in Iran. Reportedly, hydropower stations in Sichuan province provide electricity at the cost of 0.15 yuan ($0.02) per kilowatt-hour, which can rise to $0.04 during winter months.
That can explain the move by a local Chinese startup to deploy 2,000 miners in Iran. The firm has stated that Iran’s “vast natural gas resources” has helped keep electricity costs low.
However, a problem arises in the sense that there is no bitcoin mining hardware maker in Iran, which means investors have to import miners. The availability of cheap secondhand miners from China makes investing in Iran reasonable.
“With electricity that cheap, you can generate profits in one to two months.”
According to a local crypto miner in Iran, miners in the country mostly rely on imported hardware, with a few intermediary companies setting shop in the country to import the machines.
Even then, those who do the importation are people with “a lot of power and money,” but they carry out most of their business in secret.
The secrecy is due to stringent regulations and the fear of the Islamic Revolutionary Guard Corps that can detain or confiscate machines at border points.
But the potential to access cheap power hasn’t gone unnoticed, with Chinese bitcoin millionaire Chandler Hongcai Guo posting a video on Weibo in October in which he notes that Iran offers an excellent opportunity for miners.
He asks those interested to visit the country and carry out some due diligence as it is “suitable for hosting secondhand miners that are on the edge of shutting down in China.”
He also added that one could get profitable within a month or two.
U.S. led sanctions keeping out large-scale miners
While getting mining machines into Iran and establishing partnerships with locals is a big challenge, the issue gets even more complicated for multinational mining firms and wealthy individuals who would wish to do business there.
The main concern is the U.S led sanctions on Iran, which stipulates stiffer penalties for companies and individuals with U.S ties.
Guo, who has property in California, reportedly hasn’t tried to visit Iran as a result of the economic sanctions. And the same applies to large mining companies and hardware makers who are hesitant despite the apparent attraction Iran’s cheap power offers.
Most of those making their way to Iran are therefore individuals or farms at a “much smaller scale.”
Despite the appeal the country offers, the cryptocurrency mining industry in the country still operates in a regulatory grey area.
Things are about to change though, with parliament expected to ratify an earlier announcement that the government recognizes the mining industry as legal.
Disclaimer: This is not investment advice. Cryptocurrencies are highly volatile assets and are very risky investments. Do your research and consult an investment professional before investing. Never invest more than you can afford to lose. Never borrow money to invest in cryptocurrencies.