Bhutan and its ‘hush-hush’ crypto mining
Recently, Bhutan has surfaced in the media for the wrong reasons. The country that prefers gross happiness over gross domestic product was recently exposed for hiding a complete crypto mining expedition for five years.
As per Forbes, Bhutanese officials have confirmed mining crypto since it was ‘priced at USD 5000,’ this ranks the Bhutanese government second in the world to run its crypto mining operation after El Salvador.
But shockingly, the mining information was not made public, which makes it a point of interest for the global audience.
So, we were compelled to throw light on cryptocurrency and find out the consequences of crypto mining.
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The incident of crypto mining in Bhutan:
A news article about Bhutan mining crypto since 2019 was published in the local Bhutanese newspaper. Forbes then probed the claims, and then the news blew up.
Since then, Bhutan and Crypto have been the buzzing topic in the fintech market. Crypto mining firms are excited. And Bitdeer is the name that tops the excitement meter.
As per the latest information, the company is raising $500M to expand its business in Crypto mining in Bhutan.
The Himalayan country is known for its happiness index and sustainability. So is Crypto mining a safe bet for the country? Let us find out.
Crypto Mining- an introduction:
You might have heard about the cryptocurrency or its most dominant product- Bitcoin. Although there are other types of cryptocurrencies, Bitcoin is the oldest and most known type.
Satoshi Nakamoto invented the currency. He created Bitcoin as an alternative to the regular banking system. Instead of opting for a centralized system of banks, where banks regulate the entire currency, cryptocurrency is restricted less. Anyone with a computer system can mine digital currency.
Like conventional coal and oil mining, Crypto mining means mining for cryptocurrency. In traditional mining, the earth is dug up to find minerals; in crypto mining, a digital network is dug for currency.
Cryptocurrency mining is a process in which new coins are generated by solving complex mathematical equations on the blockchain.
The Story of crypto mining in Bhutan:
How might Bhutan become the second country in the world to mine crypto?
The nation is renowned for its natural resources and concern for its citizens. The nation relies on the Himalayas' fresh water supply, which also fuels the nation's numerous hydropower plants.
Bhutan swiftly became a significant player in cryptocurrency mining despite its tiny size and economically underdeveloped economy; according to some estimations, Bhutan may have contributed up to 5% of the world's Bitcoin hash rate in 2021.
The Bhutanese government has taken note of the country's success in cryptocurrency mining. However, the nation's central bank issued a warning in 2019 about the dangers of investing in cryptocurrencies while simultaneously acknowledging the potential advantages of crypto mining for the Bhutanese economy.
Since then, the government has taken action to control the business and ensure it is run sustainably and safely.
Today, crypto mining plays a significant role in Bhutan's economy, providing a living for numerous small and medium-sized firms. However, there are worries about how mining cryptocurrencies would affect the environment, especially given Bhutan's dedication to sustainability.
Crypto mining and electricity:
Electricity is the backbone of crypto mining. The entire mining process runs on computers driven by electricity. Hence, the availability of electricity and its cost plays a detrimental role in determining a nation's rank in crypto mining.
Different nations use different cryptocurrency mining methods depending on elements like energy costs, the legislative framework, and access to technology.
Cryptocurrency mining may be costly and frequently demands a sizable investment in specialized equipment in nations with high energy costs, such as the United States and Canada. However, these nations also typically have crypto-mining regulatory settings that are more advantageous, making it simpler for people and businesses to enter the sector.
China and Russia, on the other hand, have historically been significant participants in the crypto mining industry because of their lower energy prices. Thanks to its abundant access to cheap labour and affordable electricity, China is home to a sizable chunk of the world's crypto-mining facilities. The sector has changed due to China, with many miners moving to other Asian nations and abroad. Refer to the Statista graph.
Hashing, the process of solving complicated algorithms, is how cryptocurrency is mined, and it needs a lot of computational power. To pool their resources and boost their chances of effectively mining new coins, many crypto miners, as a result, join mining pools. Mining pools are prevalent in regions with high energy prices, where mining might be prohibitively expensive for individual miners.
Bhutan, therefore, has a promising future in utilising the potential of cryptocurrencies up to the cap value of 21 million.
Cryptocurrencies have a finite supply:
Cryptocurrencies like Bitcoin have a finite supply, which means that only a certain amount of coins may ever be produced. The cap limit for Bitcoin is 21 million coins. This indicates that the total supply of Bitcoin will remain constant once all 21 million coins have been mined. In May 2023, the total supply of Bitcoin was estimated by CoinMarketCap to be around 18.9 million coins. This indicates that mining has already produced about 90% of the entire quantity of Bitcoin.
Since the incentive for mining new blocks is halved every four years—a procedure known as the halving—the remaining 10% of Bitcoin is anticipated to be mined during the coming years.
The reward for mining a block was cut from 12.5 Bitcoin to 6.25 Bitcoin during the most recent Bitcoin halving in May 2020. This halving procedure aims to steadily reduce the amount of Bitcoin over time until it reaches its maximum limit of 21 million coins.
Some sources claim that as Bitcoin's supply gets closer to its maximum limit, the value of the cryptocurrency will rise dramatically.
This is due to the possibility of a scarcity effect, which would raise the price of each coin if there is a fixed supply of Bitcoin and a rising demand.
Sustainability in crypto mining is the key:
Consequently, a sustainable mining strategy is needed to get the most out of the cryptocurrency. Switching to renewable energy sources is one way to make crypto mining more environmentally friendly. Already, some cryptocurrency mining businesses run solely on renewable energy sources like solar or wind energy. However, these businesses can still participate in the cryptocurrency market while dramatically reducing their carbon footprint by utilising renewable energy to power their mining operations. Another strategy is to create new consensus mechanisms that use less energy than the existing ones.
Additionally, some businesses are looking into ways to reuse the waste heat produced by crypto mining activities, which can be utilised to heat houses and other structures in the neighbourhood. This balances out the energy consumed by the mining process and reduces the amount of energy required to heat buildings.
In general, the crypto community is becoming more conscious of the value of sustainability and is actively looking for solutions to lessen the negative effects of crypto mining on the environment. While maintaining the advantages of decentralisation and innovation that excite crypto money, crypto mining can become a more sustainable and environmentally friendly sector by utilising renewable energy sources, creating new consensus methods, and reusing waste heat.
The crypto mining sector is dynamic and sophisticated, with room for advancement and expansion. While there are legitimate reasons to be concerned about the damage crypto mining has on the environment, there are also ways to make it more sustainable and open to a more extensive range of users. The mining sector will also change, trying to balance the advantages of innovation and decentralisation and the demands of sustainability and wise use of energy resources.
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