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Venezuela’s Bitcoin Mining Crisis: Government Actions and Potential Gas-Powered Solutions

recent-raids-on-bitcoin-mining-in-venezuela-authorities-seize-thousands-of-mining-rigs

  • Venezuelan Bitcoin miners halt operations as government disconnects power, citing strain on national electrical infrastructure.
  • Miners consider gas-flaring energy as an alternative to bypass national grid and revive Bitcoin mining operations.

In Venezuela, once a burgeoning hub for Bitcoin mining, the industry faces severe setbacks due to lack of energy resources and governmental support. The once-thriving mining farms have fallen silent, with the government disconnecting them from the national electric system, citing the industry’s strain on the power supply which purportedly causes frequent outages affecting the populace.

Government Stance and Industry Shutdown

The Venezuelan government’s decision to disconnect Bitcoin mining operations from the national grid has forced miners to cease their activities, under threat of raids and seizures. This action follows reports of over 10,000 ASIC miners being confiscated, particularly targeting farms in the country’s central regions. The shutdown reflects broader regulatory and economic challenges facing digital enterprises in Venezuela.

Alternative Energy Solutions

Despite these challenges, some miners see a viable alternative in using flared natural gas—a byproduct of oil extraction—to power their operations. This method is already employed in regions like Texas, USA, and Vaca Muerta, Argentina.

In Venezuela, such a practice could potentially revive the mining sector without burdening the national electricity system. Marlon Rojas, director of Venecripto Servicios, suggests that utilizing excess gas for Bitcoin mining could be a feasible solution, independent of the national grid.

The Role of Political Will

However, transitioning to gas-powered mining operations hinges critically on political will, which currently appears lacking. The government has not shown interest in leveraging flared gas for Bitcoin mining, despite the environmental and economic benefits it could offer. 

This gas, if not flared, could significantly reduce methane emissions—a more potent greenhouse gas than CO2. Yet, without governmental backing, the shift to gas-based mining remains a distant possibility.

Economic and Regulatory Limbo

The mining industry’s crisis is compounded by a broader regulatory limbo following corruption scandals involving the National Superintendence of Cryptoassets (Sunacrip). This has led to a voluntary shutdown by miners, further stalling the industry’s operations. The lack of clear regulatory frameworks and government support continues to deter both local and foreign investment in the sector.

Potential for Revival and Support

Experts like Alexis Lugo of Criptoneros argue that if miners were to generate their own power using gas, they could not only sustain their operations but also support the beleaguered national electricity system by contributing excess power. Such contributions could potentially lead to fiscal benefits, including tax exemptions and operational expansions for the mining industry.

“Yes you can replicate a gas flaming model. You can even think that somehow you can use solar and wind energy, which are expensive to implement, but over time they give returns,” said Lugo.

Yet, the realization of such a scenario depends on a change in government policy. Cryptocurrency advisor Aníbal Garrido notes the necessity for regulatory agreements to facilitate the use of gas for Bitcoin mining.

 

“It is feasible and viable to repair or buy the turbines, and reach a concession with Corpoelec to use them, maintain them, inject megawatts to the SEN and, at the same time, to a mining operation,” he stressed.

Without a shift in governmental disposition towards the industry, the future of Bitcoin mining in Venezuela remains uncertain, potentially driving the sector back into the shadows of clandestine operations.

As it stands, the Venezuelan Bitcoin mining industry illustrates the complex interplay between technological potential and political-economic realities. While technological solutions exist to rejuvenate the sector, without political support and investment, these remain unutilized, leaving the industry in stasis.

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