Iran crypto miners cry foul over electricity backlash

An Iranian newspaper this week shamed government authorities for allowing cryptocurrency farms – especially those belonging to the Chinese – to mine bitcoin in Iran.

“Burning away public trust is even more dangerous than burning the people’s money in Chinese cryptocurrency farms,” read the Jomhouri-e Eslami editorial titled “Red farms!”

The accusations are not confined to one newspaper. For two weeks, Iranian social media, state-affiliated media, and dozens of local and national officials have weighed in on the subject of crypto farms, their electricity consumption and the alleged role mining plays in harming the nation’s air quality.

But members of the crypto community are crying foul, arguing that they are being scapegoated for Iran’s mounting woes as it battles the worst COVID-19 crisis in the Middle East and the crushing financial blow of the pandemic and United States economic sanctions.

Power outages and pollution

Crypto miners run powerful “farms” of computer gear that compete within a global, decentralised computer network to verify transactions made with cryptocurrencies such as bitcoin.

In exchange for verifying “blocks” of transactions, miners are rewarded with new coins.

The profits can be handsome. Famously volatile, bitcoin surged to an all-time high value just shy of $42,000 on January 8 but has since fallen back to around $31,000.

But crypto mining requires a lot of electricity, which is subsidised in Iran, fuelling accusations that crypto miners are profiting at the expense of the state.

Crypto advocates counter that those subsidies are not as generous for miners, who are forced to shell out export rates for electricity and can end up paying 10 times what other industries pay for power during peak months.

The government and the public have also blamed crypto miners for nationwide power outages since 2019.

This latest backlash comes as Iran’s sprawling capital Tehran – home to more than eight million people, swelling to over 12 million when you add in commuters – has been enveloped for the better part of a month in heavy smog that has spread to other cities across the country.

The deterioration in air quality has been attributed to power plants that burn mazut, a heavy, low-quality fuel oil that releases high levels of sulfur dioxide.

“We don’t want mazut to be consumed at all, but we have no other option,” Oil Minister Bijan Zanganeh admitted in early January, saying Iran’s mazut exports have been affected by US sanctions on the country’s oil industry.

Breathing toxic emissions directly contributes to 3,000 deaths in Tehran and 33,000 across Iran every year, according to the health ministry’s latest estimates in 2018.

Over a period of five days in December, close to 14,000 people across Iran were admitted to emergency rooms due to pollution-related complications, according to Mojtaba Khaledi, a spokesman for the Emergency Services Organization of Iran.

Iran’s electricity grid is experiencing a strain, which experts throughout the years have attributed to a range of fundamental issues, from mismanagement of power plants and old infrastructure that leads to energy waste to exceptionally high consumption levels of natural gas by households.

Earlier this week, President Hassan Rouhani said Iran – which has the second-largest natural gas reserves in the world – consumes more natural gas than 14 European countries in colder climates combined.

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