For the time being, Bitcoin mining in Russia is relatively stable, however sanctions might change the equation for miners—who trade BTC for cash on a daily basis with exchanges and other companies tied to the traditional banking system.
Russia accounted for over 11% of worldwide Bitcoin hashrate in July 2021, according to the Cambridge Centre for Alternative Finance. Hashrate is a measure of the network’s computational capacity, since “miners” run software on specialised hardware in an attempt to earn newly minted BTC, while also assisting in the network’s security. Compass Mining’s Will Foxley told Decrypt that “most of Russian bitcoin mining is fuelled by local natural gas or [hydroelectric power] in Siberia.” “Hashpower is unlikely to go offline unless pool providers are influenced by penalties.”
The company’s own operations in Russia are “far separated from any geopolitical instability,” according to Compass Mining CEO Whit Gibbs.
If a huge number of Bitcoin miners went down all of a sudden, as happened in China in the middle of last year, the network would become less decentralised and, as a result, less safe, even though Bitcoin has yet to be hacked. Mining started off as a solo activity (you could run the Bitcoin software on a dedicated computer in your garage and make some BTC), but it’s now a multi-billion-dollar industry driven by pools—mining as a team sport. Not just Bitcoin, but also Ethereum and other blockchains are affected.
FlexPool, one of those teams, said today that it will exclude anyone with Russian IP addresses from participating in Ethereum mining. FlexPool ranks fourth among all pools in terms of hashpower provided to the Ethereum network. In a statement, it stated, “We regret to our Russian miners; many of you do not support the conflict.” “You, on the other hand, are the ones who are supporting your country. Russia cannot function without its people.” One group of miners has taken a political stance in this way. However, in the past, pools have decided to follow the government’s lead. Antpool, the largest Bitcoin mining pool at the time with 17% of the network’s hashrate, shut off mainland Chinese members in October to comply with China’s Bitcoin prohibition.
Russia is unlikely to outlaw Bitcoin mining in the near future, as it concentrates on winning an expensive war while the West imposes sanctions on its banks and enterprises. In January, the Russian central bank advocated for the prohibition of Bitcoin mining and cryptocurrency transactions, which are currently legal murky areas. President Vladimir Putin of Russia, on the other hand, stated that the bank’s viewpoint was not necessarily his own. Putin claims that Russia has “some competitive advantages” due to its “plenty of power” and “well-trained employees.”