Good Morning Everyone,
There is a wild situation unfolding in Kazakstan as the country have seen massive increases to the cost of energy, specifically LPG (liquified petroleum gas), resulting in large anti-government protests, with the president of Kazakstan calling on Russia to send troops to support the government in quelling protests. It seems the government had a cap on energy prices and the removal of this allowed prices to increase, sparking violence and disorder across the country, unbelievably with the President ordering troops “shoot to kill” if people do not surrender. Wow.
According to an article from January 4th:
“It all began with the phased transition to electronic trading for LPG that began in January 2019 and concluded on the first day of this year. The idea was to gradually end the subsidizing of prices for domestic fuel consumers and to allow the market to dictate prices instead.”
It would appear that as a response to the protests the president has initiated a near-total internet blackout to limit communications of the people, in an attempt to reduce the populations ability to co-ordinate and organise. I can only presume it would have been the president, given the entire government cabinet resigned last week as a result of the chaos.
Netblocks have shown major disruptions since Jan 6th and reported that while it appeared connectivity was briefly reinstated yesterday, it has again been shutdown.
This is an obvious measure to be taken by a state actor, given basically all communications these days are via this protocol (TCP/IP) - including a large percentage of phone calls, which operate via VOIP (Voice Over IP). It does make me wonder if we are likely to see this in more countries as a tool, as more and more governments around the world face an increasing level of opposition for a variety of reasons including rising energy costs as well as restrictions in response to the pandemic.
What has this got to do with Bitcoin?
According to CBECI, Kazakstan is home to approximately 21.9% of Bitcoin mining hash rate (as of August 21) due to the low cost of energy. So the current situation is of particular interest in respect to how the internet blackouts impact mining operations, and the network more broadly.
The network hash-rate hit an all-time high on the 1st of Jan, and has since dropped around 19% from 209 EH to just below 170 EH. In yet another demonstration of the power of a decentralized and globally distributed computing network, there has been no impact to the networks ability to process transactions as block after block continues to be mined like clockwork or blockwork perhaps better said.
If we zoom out a little the trend is very clear. (see below)
Didar Bekbau, CEO of mining operation Xive.io (pronounced Z-ive) based in Kazakstan, posted a great thread to help the community better understand the situation and provide a boots on the ground perspective.
He states that the majority of riots are in the south, and the majority of miners are located in central and northern parts of the country and doesn’t think it will have any major impact longer term.
Didar posted as recently as 11 hours ago that half their mining rigs are back online, and expects the rest to be online within the next few days.
The situation in Kazakstan highlights internet connectivity as a very real attack vector not only for individual mining businesses, but the network as a whole, and while localised attacks like this one have little impact overall, more widespread outages where major nation states coordinated to shut down the internet, could potentially have a very material impact on the network.
According to Blockstream CSO Samson Mow, Satellite + alternative broadcasting methods would provide the necessary failsafe to protect from these kinds of attacks in future.
To quote Samson:
“I think a lot of governments will try to regulate bitcoin, but it’s going to be a very challenging thing to do because the nature of bitcoin it is unregulatable, it’s just information. A lot of people think bitcoin is money, but actually ‘we think’ bitcoin is money. Bitcoin itself is just information.
So Bitcoin in order to become the foundation of a global financial system, a new global financial system, has to have redundancy so it cannot be reliant on just terrestrial internet.”
The idea behind Blockstream satellite is first of all it’s cool, but secondary it’s also a needed technology. With Blockstream satellite we’re broadcasting these blocks, so even if an undersea cable is cut for whatever reason, a country cannot be cut off from the network because they can still receive bitcoin blocks over Blockstream satellite.”
Obviously most of us would prefer to see less aggressive and less authoritarian styles of behaviour from nations states, however as the internet continues to dilute their concentration of centralized power, there are a variety of indications this unfortunately may not be the case; and if the network is to remain secure it would seem like it is an imperative for miners to take this risk seriously and put in place appropriate measures to protect from these kinds of attacks.
It will be interesting to see how this develops within the mining industry over the next couple of years and how seriously the threat is taken, and in years to come if we will look back at this unfolding situation in Kazakstan as being somewhat of a canary in the coal mine.
Either way it certainly prompts me to deploy a level of gratitude that loved ones are safe and secure, and also hope for the best for those people impacted directly by this situation.
Hope you all have a great day, and i will chat to you tomorrow.
AK
