As the world's largest community of Bitcoin miners fled China amid a months-long crackdown earlier this year, neighboring Kazakhstan has ranked as a favorite destination for the exiled players. By August, according to estimates from Cambridge University, the central Asian nation's share of the industry's global “hashrate” had jumped to 18.1%, over twice the level in June. But in mid-October, Kazakhstan shocked the industry by announcing that it was lowering the volume of electricity miners could tap by an incredible 95%, from around 2,000 gigawatt hours, to just 100 gWh. The reason: The huge influx of farms running towering racks of ASIC computers 24/7 was straining its grid to the breaking point, causing outages that darkened homes and shuttered plants. Within months of Kazakhstan's flowering as one of the world's leading hubs for mining, its government is uprooting the equipment and people minting coins, sending the displaced searching once again for new, welcoming destinations.

The Kazakhstan earthquake is a harbinger

The shakeup in Kazakhstan underscores a potential threat to Bitcoin that may prove far more dangerous than the giant carbon footprint that worries even such fans as Elon Musk. Put simply, nations’ supply of energy is finite, and in many cases, the more juice the miners use, the less is available for families and enterprises, to the point where blackouts cause a public outcry, forcing governments to take action. Other countries, including Iran and Canada (notably Quebec province), that first reached out to miners are now severely restricting the electricity they can use to avoid an energy crisis. The danger is that as one nation after another bans or limits mining, producers will move to new, initially friendly locales with low power costs, eventually overtaxing their power generation capacity, so that a growing diaspora keeps moving to a shrinking number of places. The fewer the nations open to miners, the bigger the burden on the few that keep taking them. The Kazakhstan debacle could signal a rolling disaster that kills or wounds the world's premier cryptocurrency.

"We're talking about miners that now have to find an enormous amount of energy in new locales," says Alex de Vries, a Dutch economist whose website Digiconomist tracks Bitcoin's carbon emissions and energy use. "The shutdown in Kazakhstan takes away the amount of power used by the nation of Ireland. Now the miners must find all that electricity somewhere else." The hordes of displaced producers and multitudes of newcomers have a rich incentive to find new venues to settle. Why? Because two factors are coinciding to make the Bitcoin game incredibly lucrative—what this writer has labeled probably the most profitable legal enterprise on the planet. First, the flight from China reduced competition, giving the up-and-running miners a bigger share of the global market, and luring new entrants to fill the void. Second, Bitcoin's price has soared to a level that's a multiple of the cost to produce it. De Vries estimates that miners on average are spending about 5 cents per kilowatt hour (kWh) on electricity, or $19,000 a coin. Bitcoin's now selling at around $62,000, more than triple that number. Miners are garnering margins unheard-of even in luxury goods, cigarettes, or software.

If prices remain around that mark, licensed and illicit producers alike will keep rushing in. "Only when the cost of producing a Bitcoin approximates the price of a Bitcoin will that stop," says de Vries. In other words, a rising tide of miners will keep using more and more power to win newly issued coins until they're using so much electricity, and paying power bills so big, that the venture is no longer profitable. "When the price was $40,000, the electrical use was already rising," says de Vries. "At $62,000, I estimate that consumption will increase from today's 180 terawatt hours to 260 tWh, a jump of 44%." Hence, as more and more nations nix mining, the remaining hubs will be supporting an industry that hogs far more electricity a few years hence than it devours today.

The roster of nations banning and limiting Bitcoin mining grows

The power shortages from heavy mining are already caused a backlash in places where Bitcoin was once embraced. Iran viewed Bitcoin as a vehicle for gaining billions in revenues to counter the ravages of trade sanctions. But in May, sweeping blackouts prompted President Rouhani to halt mining over the summer. Rouhani feared that the miners would use so much electricity that his citizens' AC units would stop whirring in the broiling desert heat. The government has since allowed producers to reopen, but it put a tight new quota on the total amount of electricity the industry can deploy. Iran's once burgeoning share of the hashrate has dropped below 4%. The crackdown is sprouting spectacular headlines: Miners opened fire on authorities trying to shut them down, and the chief of the Teheran stock exchange lost his job for operating an illegal mine on the trading floor. The Persian state will no longer offer a refuge to newcomers and homeless miners. They'll need to spin the globe for new places to move or establish operations.

Maybe you've never heard of Abkhazia—I’d missed it—let alone succeed in pronouncing the name. But the Russian-supported, autonomous state of 250,000 north of Georgia has long raged as a Wild West of Bitcoin. Digging for coins is a cottage industry in Abkhazia; families sell cattle and cars to buy equipment and stack computers in their kitchens. Miners invaded Abkhazia from Russia to profit from the tiny nation's super-low electricity costs of 1 cent kWh, one-fifth the world average. In 2018, the blackouts got so bad that the government banned mining, though the illegal "kitchen" trade persisted. In 2020, it briefly lifted the stoppage, until the miners ramped up so fast that they burned out a substation. Abkhazia was scheduled to reopen in May but instead extended the lockdown until May 2022 at the earliest. The Russian miners are heading home.

In fact, regions of Russia are already feeling the squeeze. Miners booted from China are going north to icy Siberia. In mid-October, the regional governor of Irkutsk, a giant province in southeastern Siberia, sounded the alarm in a letter to Russia's deputy prime minister. He complained of "an avalanche-like increase in electricity consumption at consumer [power] prices" that swelled consumption 159% over last year. The message: The miners led by Chinese invaders should move on.

Don't forget Quebec. The province, powered by gigantic supplies of hydropower harnessed from its cascading rivers, was a big target for miners in 2018. They filed for permits that would have consumed gigantic volumes of electricity. Concerned that fully opening its doors would overload the grid, the Quebec authorities capped the gigawatts that can go to mining, and a single company absorbs most of that allotment. Right now, Alberta's prairies stand as major destination for miners feasting on cheap natural gas. We'll soon see if the industry in that oil-rich region drains so much power from homes and businesses that it pulls a Quebec.

Where will the miners go?

Indeed, Bitcoin world's map is shrinking. De Vries see Russia, now the third-ranked hub, hosting 11% of the industry's hashrate, as a logical place to land. The rub is that President Putin reviles Bitcoin as a haven for money laundering, and Siberia’s already resisting the Bitcoin tide. The U.S. has replaced China in the top position, and so far, we haven't witnessed many cases where a rise in mining causes shortages.

But it can happen. In 2017, the hamlet of Wenatchee, Wash., was happy to welcome Bitcoin producers that relished operating at low cost, courtesy of hydropower fed from the Columbia River. In 2017, Alex Pickard left a job in financial services to pack garages and warehouses with hash-spewing machines in Wenatchee and made tons of money as prices spiked. "Wenatchee attracted lots of miners," he recalls. "The problem was that they attracted a lot more than they thought they'd attract." Soon, Pickard and the other settlers were grabbing power needed to light Wenatchee's homes. The town tightened the regulations to expel miners. "The town changed the regs," says Pickard, "and I was one of the casualties."

Pickard doubts, however, that the Bitcoin regime will suffer the "rolling disaster" scenario. "These big mining outfits won't be much at risk," he says. "A lot of them are publicly traded. Hopefully they'll plan out their electricity needs based on what's available at the time." Still, the hunger to mine the Bitcoin bonanza is so powerful that it's hard to see how the players can keep picking up their gear and moving, and not overwhelm power plants and substations already at or nearly at full capacity. "Bitcoin's electricity use is already more than half the size of the U.K.'s and growing," says de Vries. "When these miners leave a place where they're producing heavily like Kazakhstan, they're often taking the need for the equivalent of an entire country's electricity with them." Bitcoin's amazing rise may be the source of its own rolling blackout as door after door keeps closing.