01: HIDDEN MINING TYCOONS
"Was this a nuclear facility bombed or a cryptocurrency mining farm?"
On June 21, the United States launched Operation Midnight Hammer, a military operation that bombed Iranian nuclear facilities in Fordow, Natanz, and Isfahan. Both the B-2 bombers that dropped bunker buster bombs and the severely damaged Iranian nuclear facilities became the focus of global attention.
Fordow after the bombing
While global media outlets are debating whether nuclear facilities have been completely destroyed, people in the cryptocurrency community are focusing on a completely different topic— "the sharp drop in mining hashrate" .
On the same day that the US bombed the Iranian nuclear site, the global Bitcoin hash rate experienced a precipitous drop, plummeting from a peak of 966 EH/s to below 700 EH/s, a short-term decline of 29.6%.
Industry insiders have stated that since hash rate is inferred from block time and difficulty, current evidence is insufficient to determine whether the decline in computing power is directly related to the attack on Iran.
However, in the eyes of people in the cryptocurrency circle, this is by no means a coincidence, and many people are speculating: "Is Bitcoin mining still being carried out secretly in Iran's underground nuclear facility?"
This time, it's no wonder that people in the cryptocurrency circle have such wild imaginations and are overly sensitive.
Contrast
Because Iran, which is perceived by the general public as a conservative "theocratic" country, is actually a major player in cryptocurrency mining.
Iran's Bitcoin mining volume once accounted for 4% to 8% of the global network, roughly equivalent to Iran's 4% share of global oil exports in those years, demonstrating its significant position.
Iran's mining industry is almost entirely driven by the national workforce. Of the country's total 42 GM (gigawatts) of electricity generation, 5 MW (megawatts) are used for official mining, while 2 GW (gigawatts) are used for underground mining (i.e., illegal mining), with the latter being nearly 400 times larger than the former .
The Rise of Major Miners
Underground mining activities in Iran are as flexible as guerrilla warfare, and have long since evolved from being "everywhere" to a stage where creativity is the key to success .
Typically, most mining equipment is quietly installed in empty rooms and basements of homes, and later it gradually spread to unexpected facilities such as warehouses, office buildings, and abandoned stadiums. Even many data centers are actually underground mining farms in disguise.
It seems that any unused space that is not easily discovered can be converted into a mine in Iran.
Open-air containers could be mines
This phenomenon has become so extreme that even some mosques have chosen to participate.
In the theocratic state of Iran, mosques can obtain free electricity from the government. This has attracted underground miners who have set up mining machines in religious sites to monetize their faith.
Bitanla
After all, for individual business owners, obtaining a "license" from the government is undoubtedly a pipe dream, so it's better to just take the risk and go it alone; if they manage to dig it up, they'll make a killing.
When it comes to selecting mining equipment, Iranians still adhere to the guerrilla warfare wisdom of "patching things up for another three years".
Mining machines, whether new or old, just need to work. Money should be spent wisely, and the goal should be affordability and value for money.
The underground mining machines that were seized in 2023
Therefore, most mining machines flow into Iran through smuggling channels. Various models such as Antminer, WhatsMiner, and Avalon are available, but most of them are outdated models, basically old mining machines that have been phased out from around the world.
This equipment, which other countries disdain, is still being used enthusiastically by Iran's friendly neighbors. The underground mining industry, consuming 400 times more electricity than legal mining, is no exaggeration; it's the result of its massive electricity consumption...
Why has the Iranian government tolerated such rampant underground mining activities for so long?
The reason is simple: the Iranian government itself is also mining , and it can expand its production capacity by confiscating underground mining equipment.
To put it in perspective, the legal mining activities currently consuming 5 megawatts of electricity in Iran are only being carried out by 300 government-approved Bitcoin mining projects, but it is estimated that the Iranian government actually has nearly 400 megawatts of capacity available.
If production capacity is ostensibly left unused, it's highly likely that it's already being used behind the scenes. It appears empty on the surface but is actually in use. Iran has masterfully employed the art of leaving things unsaid, and the organization leading the government's crypto-gold mining is none other than the Islamic Revolutionary Guard Corps (IRGC) .
As the direct force reporting to Supreme Leader Khomeini, the Islamic Revolutionary Guard Corps has a greater share of the "pie" in the country's oil and gas, military industry, real estate, and commercial sectors compared to the "Iranian National Army," which was formed from the military structure left over from before the Islamic Revolution.
IRGC has a number of funds and investment companies under its umbrella.
The Islamic Revolutionary Guard Corps, which inherently possesses the right to "engage in business" within its military, naturally gains a significant advantage in the cryptocurrency field.
This advantage is very obvious: hundreds of officially licensed mining facilities use a total of only 5 megawatts, but the Islamic Revolutionary Guard Corps owns a 175-megawatt Bitcoin mining farm in Rafsanjan, Kerman Province alone.
These are all projects jointly established with overseas investors; the number of "official underground mining activities" is truly impossible to count.
Because mines controlled by the Revolutionary Guard are usually located in special economic zones or their own military bases, they are completely different from the "cat and mouse" style of mining by ordinary underground miners.
Within these areas, the Revolutionary Guard mines enjoyed exclusive electricity, allowing them to build their own power plants and transmission lines. They were not subject to external supervision, so they could mine freely and build as much as they wanted. As for the electricity bills, whether or not they paid them was entirely up to the magistrate's mood. Most of the time, the accounts were a mess, and in the end, they inevitably became a mess of accounts under the guise of "free electricity."
With the backing of the supreme leader above and the military strength of its own troops below, the Revolutionary Guard does not directly collect protection money from underground miners, but it still has to fleece them when necessary.
As Iran's military force dedicated to upholding love and peace, it is only natural for them to help the country combat "illegal mining activities." In addition to personally seizing a large number of underground mining machines, they also help the National Electricity Company of Iran deal with the illegal mining machines that have been confiscated. Good!
The spokesperson stated that the seized mining machines would be auctioned off by the judicial system, but in reality, the vast majority were reused for mining by the military and its affiliated agencies.
It turns out they've just received a new shipment.
According to a former Iranian energy official, these devices are usually "handled internally," and multiple military bases have been found to have deployed a large number of mining machines, many of which were previously seized models.
That's not all. If the price of Bitcoin rises and mining power is increased, or if there is a power shortage, the residents near the mining farm will suffer greatly. All the electricity will be supplied to the base for "military use," and the mining machines cannot stop for a moment.
Media condemns IRGC for using cryptocurrency mining to drain the nation's coffers.
Even though the general public understands this, the Islamic Revolutionary Guard Corps still regards "cracking down on illegal mines" as its public relations magic weapon . When its military media encounters power outages, they blame underground mining and then prepare for the next round of crackdowns on mining machines. As a result, energy regulation has never been the responsibility of the Revolutionary Guard Corps.
Ironically, Iran's Ministry of Energy, which has real regulatory power, attempted to close an underground mine with ties to the Revolutionary Guard in 2021, but the military intervened and the attempt ultimately failed.
Iran has made mining its primary productive force.
Although there are constant conflicts between the government and the public regarding mining, both sides are surprisingly consistent on the same issue: they want to mine as much as they want.
Why is Iran so obsessed with mining by its entire population?
02: THE BITCOIN CURSE
In short, it was forced upon him.
Although Iran possesses vast oil, gas, and mineral resources, it has long been subject to US sanctions since the Islamic Revolution, resulting in severe economic isolation.
With the Iranian nuclear issue remaining unresolved for a long time and conflicts and sanctions escalating, the Iranian government viewed cryptocurrency as an efficient tool for generating income by circumventing the restrictions of the international banking system after the United States reinstated large-scale sanctions against Iran in 2018.
Oil exports plummeted after sanctions
Because Iran has one of the world's lowestelectricity prices (residential electricity is about $0.005-$0.01 per kilowatt-hour), the cost of mining a single Bitcoin can be as low as $1,000. Compared to the market price of tens of thousands of dollars per coin (which recently broke through $100,000 per coin), the profit of tens or hundreds of times is very tempting.
Prior to this, Iran had consistently refused to recognize cryptocurrency mining as legal and had repeatedly shut down mining farms, confiscating tens of thousands of mining machines (they've now switched to government jobs).
However, in 2019, Iran officially declared the cryptocurrency industry a legal industry in the country. First, it introduced a cryptocurrency mining license system and began issuing mining licenses to foreign countries. Then, it used its cheap electricity to attract global mining capital and even absorbed some of the miners who had been driven out of China in the past.
Chinese mine owners are still drawn by the cheap electricity prices ($0.027/kWh).
As for the terms of the exchange, you first have to pay for a license, and all the mined Bitcoins must be sold to the Central Bank of Iran, otherwise taxes will be levied.
However, after witnessing the methods of official organizations such as the Islamic Revolutionary Guard Corps, one knows that things are not so simple. After all, if they can build and operate mines themselves, why would they let outsiders do this business and make a profit?
IRGC is also a major official smuggling operation.
They keep raising electricity prices for mining farms under the pretext of affecting power supply, or they raid non-compliant mining machines every now and then. In the end, many mine owners don't save much money after calculating their costs. They either can't hold on and run away, or they turn around and join the ranks of underground miners.
Meanwhile, due to long-term sanctions, Iran experiences significant price fluctuations, with its inflation rate remaining above 30% for three consecutive years. Therefore, compared to the pressure of domestic price changes, the rise and fall of Bitcoin is insignificant.
Iran's inflation surge and the subsequent cryptocurrency mining boom occurred almost simultaneously.
As a result, nearly 18 million people ( out of a total population of nearly 90 million) in Iran hold crypto assets, and there are also nearly 600 digital exchanges in the country.
The public not only believes that cryptocurrencies are more reliable, but also that they can "print money" in their own basements. Even if there is a risk of being shut down, they will buy equipment and continue mining after the shutdown. It is estimated that only bombing and power outages can stop underground mining in Iran.
Under this trend, the authorities are increasingly seizing mining machines to expand computing power, while more and more forces are trying to bypass the authorities and join the underground mining field.
Thus, under this bizarre dynamic equilibrium, Iran's nationwide mining ecosystem was complete, but where would the electricity come from...?
Although Iran has abundant resources for power generation, the extremely low electricity price does not mean that the power grid can handle it. Due to the severely underdeveloped state of Iran's power infrastructure, many power facilities are seriously outdated, and the power grid cannot support the huge demand for electricity from mining.
The underground mine, Spider Cave, isn't much better on the surface.
According to data from Iran's Ministry of Energy, cryptocurrency mining during peak electricity demand periods can consume up to 2,000 megawatts of electricity. 1,000 megawatts of electricity is roughly enough to meet the daily electricity needs of a city with a population of 100,000, demonstrating the sheer scale of the mining operation.
What's more troublesome is that whether it's mines hidden in military bases or mining workshops scattered throughout the basements of Iranian homes, these power sources are difficult to track and control. Many of them even bypass electricity meters and directly steal electricity by connecting to the grid, ultimately causing the power grid to be unable to cope with sudden peak electricity demand, making Iran a frequent victim of power outages .
2019 was considered the inaugural year of mining in Iran, and frequent power outages became commonplace. By 2021, large-scale power outages occurred in major cities, including the capital Tehran, and President Rouhani issued a mining ban that lasted for four months.
Of course, this could not stop the mining craze. As underground mining continued to recover, the country still faced frequent power outages in the following two years. In particular, in 2024, Iran experienced an unusual heat wave, and there were not enough people to use air conditioning, but mining activities continued, causing widespread public discontent.
A Tehran shoe workshop shut down due to power outage
The government criticized "underground mining" as the root of the problem, while the public angrily denounced the government and other privileged classes for enriching themselves through official mining farms. But upon closer inspection, everyone was mining. Bitcoin is undoubtedly a curse hanging over the heads of Iranians, causing them distress, yet they have long been unable to live without it.
While it may seem like people are making money by mining Bitcoin, the losses from power outages caused by overloading mining are enormous. According to Iranian media data, the production losses caused by large-scale power outages each year in recent years are conservatively estimated at $25 billion .
It's so hot and there's a power outage, I can't even do business.
This is only the direct loss. If we take into account the indirect losses caused by the power outage, such as rising prices and increased unemployment, mining may really become a losing proposition for society. Moreover, the final cost is borne entirely by the Iranian people .
03: CRYPTO PLAYERS
Similar to Iran, many countries that don't have much international standing are getting incredibly active in the crypto space.
These countries generally fall into three categories: those with a simple economic structure, where, compared to normal industries, they can make money simply by mining for cheap electricity; those subject to external sanctions and needing special channels to earn foreign exchange; and those facing immense economic pressure, uncontrollable inflation, and a loss of public support for their fiat currency.
Kazakhstan , a major energy power in Central Asia, became the world's second-largest mining center in 2021 (accounting for 18% of global computing power at its peak). With its low electricity prices and relaxed policies, it has also attracted a large number of Chinese miners.
Traditional industrial cities such as Karaganda, Pavlodar, and Oskman have become mining hubs.
Similar to Iran's fate, despite having advantages in electricity prices and policies, Kazakhstan's power system, inherited from the Soviet era, lacked an advanced demand response system and struggled to adapt to the sudden increase in mining demand, ultimately leading to a power crisis and a decline in computing power.
Bhutan , the world's first country to achieve negative carbon emissions, boasts abundant hydropower resources and a favorable climate. In recent years, it has invested heavily in cryptocurrency mining, with equally impressive returns.
Since 2020, Bhutan has mined over 12,000 Bitcoins, worth up to $1.3 billion. With nearly 40% of its GDP now held in Bitcoin, it has become the world's third-largest holder of Bitcoins, making it a truly remarkable country that has quietly amassed a fortune.
North Korea not only exploits its natural resources for power generation and mining, but it is also a leading cryptocurrency thief in the international community.
North Korea's quietly deployed Bitcoin mining facilities are mostly located in remote mountainous areas, relying on hydroelectric power plants for electricity to conduct small-scale, low-noise mining activities.
They even got a warning from the FBI.
The North Korean official hacking group known as the "Lazarus Group" is the main culprit in cryptocurrency theft, having stolen a record $1.5 billion in crypto assets this year. It is estimated that North Korea currently holds more than 13,500 Bitcoins, surpassing the reserves of countries such as Bhutan.
Venezuela , as a "testing ground" for hyperinflation and a national cryptocurrency, has seen its official national cryptocurrency "Petro" fail, but due to hyperinflation, cryptocurrencies are still widely used by the public.
El Salvador , the world's first "Bitcoin fiat currency country," saw President Nayib Bukele push for legislation in 2021 to officially recognize Bitcoin as legal tender for the first time. He also introduced "Volcano Bonds" and the national wallet "Chivo Wallet."
However, the country suffered a blow from the International Monetary Fund (IMF) this year, and in order to receive United Nations development assistance, it had to return to mainstream fiat currency rather than cryptocurrency, ultimately ending the cryptocurrency revolution.
In Salvador today, cryptocurrency is still used, but it cannot replace fiat currency.
After all, even with the adoption of cryptocurrencies at the national level, their speculative nature remains undiminished, and speculation is essentially a zero-sum game .
Amid the allure and curse of cryptocurrencies, which governments and citizens in these countries are willing to be the winners, and which are willing to be the losers?
