Iran, which mined about 4.5 percent of the world’s bitcoin this year through April, has imposed a temporary ban on Bitcoin mining after some of its cities experienced repeated electricity blackouts.
The government blames illegal miners or those operating in Iran without licenses for most of the energy consumption from its bitcoin mining, and for exacerbating the country’s energy crisis, CNBC reported.
Tehran and several other large cities have faced multiple daily power outages for months. Officials blame it on a natural gas shortage, a prolonged drought that’s affected the country’s hydroelectricity plants and, increasingly, bitcoin mining.
The ban will last until Sept. 22, President Hassan Rouhani said.
Iran has 50 licensed mining farms which use 209 megawatts of power. The government says that 85 percent of bitcoin mining there is done illegally. Iran is in the top 10 in the world for Bitcoin mining, while China is in first place at nearly 70 percent.
Bitcoin’s price, which hit close to $64,000 in April, has attracted fresh scrutiny of the cryptocurrency’s environmental impact. Cambridge University researchers created an online tool that estimates bitcoin electricity consumption. The Bitcoin Electricity Consumption Index shows that bitcoin consumes about 124 terawatt-hours per year — about a half-percent of the world’s total consumption and as much as Pakistan’s.
Most electricity used to mine bitcoin comes from fossil fuels, and most mining is done in China, where subsidized coal-fired power plants produce some of the cheapest energy in the world, according to The Phoenix. Miners must solve a mathematical puzzle using computers. About every 10 minutes, someone solves a puzzle and is rewarded with some bitcoin. Then a new puzzle is generated, and the whole process starts all over again. The puzzles help to ensure that no one fraudulently edits the global record of all transactions.
“Bitcoin uses more electricity per transaction than any other method known to mankind,” Microsoft founder Bill Gates said during an interview on Clubhouse.
Tesla CEO Elon Musk said he would no longer allow purchases of electric vehicles in bitcoin, citing environmental concerns. The Bitcoin price declined by 10 percent. China announced a crypto ban in May, forbidding financial and payment institutions from providing services for crypto transactions. The Bitcoin price fell even further to as low as $30,000 before paring some losses. In April, Turkey’s central bank banned the use of cryptocurrencies and crypto assets.
News media that have reported on Iran’s Bitcoin ban have been accused by many Twitter users of sewing environmental FUD — fear, uncertainty and doubt — and helping to move markets. FUD is a strategy to influence the perception of certain cryptocurrencies or the cryptocurrency market in general by spreading negative, misleading or false information, according to a glossary from price-tracking website Coinmarketcap.
“More FUD. Countries have been ‘banning Bitcoin’ for nearly 10 years now. No one can stop a decentralized monetary network,” Riggs@RiggsBTC tweeted.
Ultimately, the crypto community will need to help solve Bitcoin’s environmental concerns, wrote Nic Carter, general partner at Castle Island Ventures, a Cambridge, Massachusetts-based venture firm investing in public blockchain startups.
“As with every other energy-consuming industry, it’s up to the crypto community to acknowledge and address these environmental concerns, work in good faith to reduce Bitcoin’s carbon footprint, and ultimately demonstrate that the societal value Bitcoin provides is worth the resources needed to sustain it,” Carter wrote in a Harvard Business Review column.
Listen to GHOGH with Jamarlin Martin | Episode 74: Jamarlin Martin Jamarlin returns for a new season of the GHOGH podcast to discuss Bitcoin, bubbles, and Biden. He talks about the risk factors for Bitcoin as an investment asset including origin risk, speculative market structure, regulatory, and environment. Are broader financial markets in a massive speculative bubble?