When the old USSR collapsed decades ago, a vast number of manufacturing plants in Siberia that had supported the Cold War military industrial complex were forced to shut down. The infrastructure, however, is still in place, waiting for some kind of plan for re-birth, but more importantly, the old hydroelectric power plants that had delivered the necessary electrical power are still in place, as well. What better to take advantage of these resources and ideal set of circumstances than crypto mining operations?
During a Coindesk interview, Dmitry Ozersky, CEO of Eletro.Farm, a mining company building a large venue in Kazakhstan, talked to Russia’s electric power dynamics:
The surplus of electric power in Russia is huge, due to the closure of some of the Soviet plants and to the fact that energy consumption, in general, became much more efficient over time.
Mining teams from the U.S., Russia, Korea, Brazil, India, Japan, and Spain have set up their rigs here to benefit from low power costs and prevailing cool temperatures. A multitude of these miners have set up shop in Bratsk, one of a list of old industrial cities that had been abandoned. It is also located on the bank of the Angara River, where a hydroelectric plant is still functioning and providing more than enough electricity to drive the mining operations on site. Average temperatures are 28 degrees Fahrenheit, but they persist around zero for eight months of the year.
The growth has been of a recent nature, but the combined effort is beginning to make a dent in the market share statistics for Bitcoin “hashpower”, the total amount of computing power devoted to solving daily reconciliation calculations. Best estimates at present are that Russian mining operations now account for 7% of total hashpower, compared for example to 60% that mining operations in China deliver. China has been the undisputed “King” in the mining arena, one good reason why Chinese officials have not totally banned the activity.
Crypto regulations in Russia are still up in the air, so to speak. There have been long debates, rumors, innuendoes, and outright denials about the course to be taken, anywhere from a total ban to a State sponsored digitized Ruble program, but there are no current restraints on these newly flourishing mining enterprises. Entrepreneurs have flocked to the area from every point on the globe, recognizing the apparent opportunity and being enthusiastically received by local officials.
Bratsk mayor Sergey Serebrennikov is overjoyed at his town’s comeback:
It’s an absolutely new part of the economy and commerce in Bratsk, and for us, this project is interesting in every regard. It’s providing new jobs and new big taxes paid to the city budget.
Development plans did not happen overnight. Mining of Bitcoins or other cryptos were not on the radar screens of most nations until a few years ago, due to the low value of rewards and the age of the industry, but as the prices for Bitcoin and others soared, the activity began to get noticed. Cryptoreactor CEO Fedor Egorov recalled the history of the area with CoinDesk:
The production has been stalled for the last 15 years, and with each year, the decline would get worse and worse, until in 2017, the owners decided to develop this venue in a different way, for example, for a mining hotel.
Crypto mining, however, has stirred up environmentalist concerns across the globe, due to the amount of power that must be consumed, typically from fossil fuel driven electric plants, but in Siberia, the prevalence of hydro-powered electrical generating facilities allows the region to have some of the lowest power generation costs in the world. The natural nature of the plants will keep environmental issues at bay, and 4 cents per kilowatt-hour, roughly half of the average price for all of Russia, will keep operations in profitable territory for years to come.
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