Is crypto mining exhausting the electricity system of Ukraine?

18 September 2024 7 minutes Author: Cyber Witcher

How does cryptocurrency mining affect the electricity grid of Ukraine in the context of the energy crisis? Consider the main factors that cause increased energy consumption during mining and their impact on the stability of the power system. Find out if mining poses a threat to Ukraine’s energy industry and how this may change with the development of technology and regulation.

How does mining work in the world and in Ukraine?

Cryptocurrency mining in the world, in particular in Ukraine, remains popular, despite the difficult conditions. Ukraine is among the top 10 countries with a positive attitude towards cryptocurrencies, and about 6% of its population owns cryptocurrencies. The cost of mining one bitcoin here ranges between $10k-$20k, which is quite low compared to other countries such as the US, where it reached $21,089 at the end of 2022. The April 2024 halving reduced the mining reward, but Ukraine still remains attractive for crypto investment.

Bitcoin mined using proprietary hardware is the main focus for many cryptocurrency mining companies. After the halving in April 2024, the difficulty of mining and the cost of obtaining Bitcoin increased significantly, by about 50%.

Cryptocurrency mining in Ukraine has both positive and negative sides. It stimulates business development and attracts investors, but law enforcement officers often accuse miners of tax violations and theft of electricity. In 2024, a group of cybercriminals was arrested, and earlier several underground cryptofarms were discovered. Despite the digital asset law, mining remains unregulated. The government is working on implementing the MiCA rules, which will make the market more transparent. At the same time, cryptocurrency played an important role in fundraising for the Armed Forces, reaching $225 million.

What is the mining hashrate in Ukraine?

Analysts studied mining in Ukraine, collecting data for July 2023 – June 2024. They determined the average hashrate for 146 mining systems and power consumption using Bitcoin metrics. Hashrate measures computing power in hashes per second. Since there is no exact data on the number of miners, the researchers assumed the participation of Ukrainian users, taking into account the average power of the equipment. There are three active mining pools in Ukraine, using approximately 33 kWh.

Top 15 mining pools and their countries of origin

Activity of mining pools in the world. Top-15 according to the source. Activity for three months.

In May 2024, the hashrate of global mining pools ranged from 3.29 to 184.17 exahashes per second (EH/s), which significantly exceeds the indicators in Ukraine. Ukrainian pools show hashrates at the level of several megahashes per second (MH/s), which is much lower. One exahesh (EH/s) equals one trillion megahashes (MH/s), highlighting the difference in computing power between global and Ukrainian mining systems.

To calculate the hash rate in Ukraine, analysts used data on unique users and traffic to mining pool sites using the Similarweb service. They assumed that 50% of Ukrainian users are engaged in mining, although for accuracy they considered options with 100%, 50%, and 10% of traffic. These numbers are indicative and are used for a general idea of ​​the level of mining in Ukraine.

This chart illustrates the electricity consumption of Ukrainian cryptominers by month in 2024. The percentages in the graph reflect the number of visitors to mining pool sites that can mine, where peak consumption in March reached 2026.6 MWh (at 100% scenario). This period coincides with a massive attack by Russia, which caused power outages in many regions, including Odesa, Sumy and other regions.

The electricity consumption of cryptominers in Ukraine in April, May and June 2024, even with a 100% scenario, does not exceed the indicators of industry or household consumers. Even at maximum consumption, cryptomining does not reach the energy consumption levels of major economic sectors such as transportation, utilities, and industry.

How much electricity do cryptofarms in Ukraine consume?

In March 2024, crypto farms in Ukraine consumed approximately 1013 MWh of electricity, in April – 616 MWh, and in May – 487 MWh. For comparison, a steel plant consumes between 200 and 1000 MWh depending on the production. Thus, the electricity consumption of cryptofarms in April and May 2024 equaled or exceeded the consumption of large industrial facilities, which indicates a significant impact of mining on the energy system of Ukraine.

Months with hourly blackouts are marked in red.

The graph shows the growth of hashrate in Ukraine from July 2023 to June 2024, when mining reached its peak in March with 1013 MW per hour. Miners use computing power to solve mathematical problems, confirming transactions in the blockchain. In March, miners consumed 6.7% of the country’s total electricity, which was partly caused by cryptocurrency price volatility and power outages. This indicates the growing influence of mining on the energy system of Ukraine.

  • 0.76% – if 10% of traffic is mining;

  • 3.8% if it is 50%;

  • 7.59% if 100%.

Percentage of electricity consumed by mining in Ukraine (depending on the number of miners)

If you compare electricity consumption by miners in Ukraine with global indicators, their consumption is much less. For example, in the US, miners consume about 8-10 GW per hour, while Ukrainian miners used only 10% of this amount in March 2024. To estimate the amount of electricity consumption, analysts calculated possible scenarios, taking into account 10%, 50% and 100% of traffic to mining resources. As a result, calculations are focused on the 50% option for greater accuracy.

On average, Ukrainian miners consumed a certain percentage of electricity from the total volume of 13 GW per hour during April, May and June 2024. These figures varied depending on the percentage of traffic engaged in mining. Consumption was highest in March, when computational complexity and hashrate peaked. By June 2024, consumption has dropped to 377.2 MWh, as cooling equipment in warmer months increases costs, making mining less profitable.

We compare Bitcoin mining and household electricity consumption

Mining one Bitcoin requires about 110,000 kWh of electricity. The average cost of electricity for this process is $46,291, while the market price of Bitcoin at the beginning of September 2024 is $58k. In Ukraine, the cost of one Bitcoin can be much lower – about $12,540, which is explained by lower electricity prices, although this does not take into account other costs, such as equipment and its depreciation.

How energy-intensive is cryptocurrency mining compared to other types of consumers.

A few key examples:

  • Hospitals: In April 2024, at 50% miner activity, the electricity consumption is equivalent to the needs of 770 hospitals.

  • Street lighting: At 50% mining activity in April, electricity consumption is equivalent to powering more than 4 million street lights.

  • Air conditioners: In April, at 50% miner activity, electricity consumption is equal to the energy needed to operate more than 600,000 air conditioners.

From Bitcoin to Memcoins

An example of what a mining farm might look like.

The most expensive cryptocurrencies are currently Bitcoin and Ethereum. As of this writing, Bitcoin’s market capitalization is approximately $1.232 trillion. The capitalization of Ethereum is approximately $315.70 billion.

The five most popular coins include:

  1. Bitcoin (BTC)

  2. Ethereum (ETH)

  3. Tether (USDT)

  4. Binance Coin (BNB)

  5. Solana (SOL)

There are also so-called meme coins. These are cryptocurrencies that started as a joke or a meme. Over time, they gained significant value and a large user base due to their popularity on social media. Here are just a few of them in random order.

  • Dogecoin (DOGE)

  • Shiba Inu (SHIB)

  • PepeCoin (PEPE)

  • SafeMoon (SAFEMOON)

  • Povel Durev (DUREV)

The DUREV cryptocurrency is based on a meme about Pavel Durov, who also developed TON (Telegram Open Network), which became popular in Russia and the UAE. Projects such as the Solana blockchain and the KUNA crypto exchange, which is actively operating in Eastern Europe, appeared in Ukraine. However, the cryptocurrency market in Ukraine is still not regulated, and plans to build mining centers around the nuclear power plant have been delayed due to the energy crisis and the war. Solving the problem is possible through the development of alternative energy and government regulation.

The information was taken from the open sources of Molfar

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