The United States, Kazakhstan, and Russia account for more than half of the Bitcoin network's computational power. Now that Russia is preparing for war with Ukraine, some in the cryptocurrency sector are keeping a close eye on the network to see if anything goes wrong.
Sanctions could change the calculus for Russian Bitcoin miners—who often swap BTC for cash with exchanges and other businesses tied to the old banking system. For the time being, mining in Russia is relatively stable.
In July 2021, Russia accounted for more than 11 percent of the worldwide Bitcoin hashrate, according to the Cambridge Centre for Alternative Finance. 'Miners,' who run software on specialized hardware in an attempt to win freshly generated Bitcoins (BTC), assist protect the network by increasing the hashrate.
There is a significant amount of Russian bitcoin mining fuelled by domestic gas or hydroelectric power in Siberia," Will Foxley of Compass Mining said. Researchers believe that, "Hashpower is unlikely to go offline until fines impact pool providers".
A statement from Chief Executive Officer Whit Gibbs was made public on Twitter, stating that the company's Russian facilities are "fully solitary from any geopolitical instability."
Even though Bitcoin has yet to be hacked, the network would become less decentralized and less safe if a big number of Bitcoin miners suddenly went down, as was the situation with China in the middle of last year.
Mining began as a hobby (you could run the Bitcoin software on a dedicated computer in your basement and earn some BTC for the trouble), but it has now developed into a multi-billion dollar industry driven by pools—mining as a team sport. Bitcoin, Ethereum, and other decentralized ledger systems are all affected by this.
A startup called FlexPool, which supplies more than 5% of the Ethereum network's hashpower, said today that Russian IP addresses will be barred from participating in mining. "We regret to our Russian miners; many of you do not support the conflict," it said in a statement. "However, you are the ones who are helping to keep your country strong. Russia is unable to function without its citizens. We can only have an impact on this conflict if we reduce the population's economic power. This is not a decision we make lightly, and we appreciate you for your loyalty."
Those are the political views of a certain group of miners. Pools, on the other hand, have in the past sided with the government. After China's Bitcoin ban took effect in October, Antpool, the largest Bitcoin mining pool with 17% of the network's hashrate, cut off members in mainland China.
Russian authorities aren't likely to impose any restrictions on Bitcoin mining in the near future, given their concentration on fighting an expensive war and the Western sanctions imposed on their banks and enterprises. According to the Russian central bank, Bitcoin mining and cryptocurrency transactions, which are now in a murky area of the law, should be forbidden. Russian President Vladimir Putin, on the other hand, said that the bank's position was not necessarily the same as his own.
Given Russia's "surplus of electricity and well-trained employees available in the country," Putin says Russia has "some competitive advantages." For example, with more than 20,000 mining rigs and hosting at $0.062 per kilowatt-hour(kWh), Bitcluster has been operating in Russia since 2017. In order to mine bitcoins, a company called Vekus makes use of Gazpromneft, a Russian oil drilling affiliate. The Siberian region is also home to the mining business Compass Mining, which employs bitcoin miners.
Many nations have begun imposing and threatening economic penalties in response to Russian forces' invasion of Ukraine, which has drawn the attention of the international community. UBS slashed Russia's bond market to zero and Russia's stock market trembled as a result of the unpredictable markets.
Economic penalties against Russia have been imposed by the European Union, and President Joe Biden has announced that the United States will follow suit. SWIFT payment network, despite the U.K.'s pleas to bar Russia from using its services, remains open for business with Russia. Erik Voorhees, founder of Shapeshift and a crypto enthusiast, made fun of Russia's continued use of SWIFT.
Vladimir Putin's "outrageous" acts have convinced the West to let Russia continue utilizing the SWIFT network, Voorhees tweeted on Sunday.
Russia's use of cryptocurrency and crypto asset mining is already being discussed in the media. Economic sanctions were avoided, according to blockchain intelligence firm Elliptic's findings. To go along with its announcement of bitcoin mining chips, Intel, a California-based technology corporation, warned semiconductor manufacturers this week that they should "diversify their supply chain."
On February 15, 2022, Bitcoin's hashrate was at an all-time high. Since then, it has fallen slightly. On that day, the hashrate peaked at 249.75 exahashes per second (EH/s), and it is now down 26% from that high, at 182 EH/s, according to six-month statistics. While the crisis in Ukraine appears to have little effect on bitcoin miners, Flexpool, an ethereum mining business, said on Thursday that it will cut off Russian ethereum miners. As of this writing, Flexpool is the fifth-largest ethereum miner in terms of hashrate.
Following Russia's invasion of Ukraine, Flexpool, the world's fifth-largest Ethereum mining pool, terminated services to Russian users. To show support for Ukraine, the decision was made.
However, "we normally do not get engaged in politics," a Flexpool spokeswoman remarked on Thursday evening on its official Telegram channel. "Nonetheless, this is a problem that extends far beyond the realm of politics. A global war could be averted if the United States and China can work together to resolve this conflict. Many innocent individuals in Eastern Europe are losing their lives as a result of the conflict."
A statement of support for Ukraine was made by Hiveon, the second-largest pool, on its Telegram channel, but no concrete action was announced.
Flexpool's limits can be circumvented, according to Reddit users, by employing efficient virtual private networks (VPNs).