I am the first to admit I know somewhere between nothing and less than nothing about bitcoin. It is up there with my knowledge of volcanic eruptions. When you put the two together and come up with bitcoin mining from volcanoes, my head starts to spin and I reach for my too hard basket.
However, I have had to try and get my head around these two things working in unison when I add a dose of Tonga and El Salvador to the mix. And a bit of Kazakhstan.
So come with me on a journey that makes for an interesting ride.
I know that I am probably being a bit simplistic, but it seems to me that bitcoin is a modern version of the old barter card. Though, for myself, having never used either, I still feel more comfortable with the notion of trading something of value for something of value - ie labour, expertise - rather than an intangible symbol. No doubt bitcoin enthusiasts can put me right on this. However, if I was to offer a website design in exchange for a carpenter doing work on my home, I consider that both of us have gained something of value and it would have benefitted both parties.
With currency tied to gold, people might say “all you have is a pretty metal”, then I would say that gold is very rare, is almost indestructible and cannot be created economically except inside stars. There’s its value as a safe haven currency.
When compared to fiat currency, which is a government-issued currency that is not backed by a physical commodity, such as gold or silver, but rather by the government that issued it, I personally feel more secure with gold backed currency.
But back to bitcoin. This short video was simple enough for even me to understand so it is worth a watch.
In 2021, El Salvador adopted bitcoin as legal tender. El Salvador is not a shining beacon of financial success. It was the first country to accept bitcoin as legal tender.
Shortly after President Bukele’s June announcement that Bitcoin would be legal tender in El Salvador, he tweeted that the country would mine its own bitcoins.
Putting this into terms that even I can grasp, it seems that El Salvador was going to use volcanoes to generate electricity that it could then sell on the bitcoin market. Being brought up on the central volcanic plateau in New Zealand, I am no stranger to geothermal energy generation.
Geothermal energy use in New Zealand is strongly tied to Wairakei, near Taupo where the first geothermal plant was opened in 1958.
However, El Salvador linking its geothermal electricity to mining bitcoin doesn't really add up to economic sense. It costs more electricity to create the mined bitcoin than what is produced.
Now here is where it starts getting interesting.
China kicked cryptocurrency miners out of China in May. They all headed off to neighbouring Kazakhstan which welcomed China's cast-off miners with open arms. Since 2019, Kazakhstan has invested hundreds of millions of dollars to support crypto mining operations, believing that its cheap and abundant supply of fossil fuels—essential for mining—could lure the industry and unlock a new source of government revenue. A government report in October estimated that taxes from crypto mining farms could contribute $1.5 billion in government revenue in the next five years.
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Kazakhstan may no longer be the bitcoin sanctuary it once was, according to some big miners who are looking to leave the global crypto hub following internet shutdowns only this month, January 2022, that compounded fears about tightening regulation.
The government web shutdowns during an explosion of unrest in the country, the world's second-largest centre for mining, caused bitcoin's global computing power to drop around 13% as data centres used to produce the cryptocurrency were knocked offline.
Now, enter Tonga. You knew I would get there in the end, didn't you?
In a ruling that is “almost identical to the El Salvador bill,” Tonga's Lord Fusitu’a, a former member of parliament for Tonga, said that things were looking rather good for Bitcoin becoming legal tender in Tonga. Copying El Salvador’s playbook, the move could bring onboard more than 100,000 Tongans onto the Bitcoin network.
And the idea of mining volcanoes
Mataʻiʻulua ʻi Fonuamotu, Lord Fusitu’a said that plans are in motion to use state-run volcano mining facilities to create wealth in Tonga.
Tonga has 21 volcanoes. “That means one volcano for every 5,000 people.” He owns one volcano himself through his family’s hereditary land rights.
The proposed Bitcoin mining operations would use the geothermal energy of the volcanoes to generate power.
Two days later, a volcanic eruption underwater has certainly sent Tonga into a bit of a spin in economic and humanitarian terms.
China has been very generous to Tonga hasn't it?
China is no great fan of bitcoin mining, is it?
Tonga is very strategically well placed in the Pacific, isn't it?
Oh, did I mention that nuclear torpedoes can create underwater explosions and tsunamis?
Gee, it might be time for me to search ebay for a new tin foil hat. It's a funny old world.....
sources:
https://www.reuters.com/technology/kazakhstans-bitcoin-paradise-may-be-losing-its-lustre-2022-01-14/
https://nypost.com/2021/11/22/el-salvador-to-build-bitcoin-city-at-base-of-volcano/
https://coincentral.com/bitcoin-for-dummies/
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