The Kingdom Of Bhutan Has Been Quietly Mining Bitcoin For Years:
The Himalayan kingdom confirmed it has been running a bitcoin mining operation as mystery surrounds the scale of its earlier cryptocurrency investments.
Beneath the Himalayas, rivers fed by ancient glaciers supply the tiny kingdom of Bhutan with immense stores of hydroelectricity. The renewable resource has become an economic engine, accounting for 30% of the country's gross domestic product, and fueling the homes of nearly all of its 800,000 residents. But for the past few years, Bhutan's royal government has been quietly devising a new use for these reserves: powering its very own bitcoin mine.
Sources familiar with Bhutan's efforts to develop sovereign mining operations told Forbes that discussions have been occurring since 2020, though until this week its government had never disclosed its plans. Bhutan sought to harness the country's hydroelectric plants to power racks of mining machines that solve complex mathematical problems in order to earn bitcoin rewards. Once completed, this would make Bhutan one of the only countries to run a state-owned mine, alongside El Salvador.
On Saturday, days after Forbes contacted Bhutanese officials with questions about the mining scheme, a government representative confirmed to local newspaper The Bhutanese that it had begun mining "a few years ago as one of the early entrants when the price of Bitcoin was around USD 5,000." It explained that the earnings go towards subsidizing power and hardware costs.
Bhutan's Ministry of Finance did not respond to a list of questions from Forbes about the scope of the enterprise. It's unclear when mining began, where it's located and whether the scheme has turned a profit. (As for the start date, bitcoin was valued at $5,000 in April 2019.) It's also unclear why Bhutan never disclosed the project to its citizens or international partners.
[...] Bhutan's government appears to have considered working with other miners beyond Bitdeer. Insiders at rival services and pools, where miners share compute power to unlock new bitcoin blocks faster, said they have held advanced talks with senior government officials, including Druk, about the kingdom building and operating a hydro-powered operation. Consultants who advised the government on its mining strategy prior to Bitdeer's announcement told Forbes that Bhutan had previously inquired about a 100 MW operation hooked into one of its hydroelectric plants.
(Score: 4, Insightful) by Mykl on Wednesday May 03, @01:02AM (15 children)
What a tragedy that a sovereign government has decided to throw this much into a high risk investment with little social benefit to anyone. I would've thought that there would be plenty of people out there who would happily pay to draw down on the electricity provided by Bhutan's Hydro capabilities - why not charge them instead? It's not too hard to envision a company like Google setting up a server farm there and being able to claim zero carbon emissions to their users and regulators. Instead the Bhutanese are now part of a massive Ponzi scheme.
(Score: 2, Insightful) by khallow on Wednesday May 03, @03:21AM (12 children)
What's "high risk" about it? Superficially, it's a straight-forward conversion of cheap electricity into a financial instrument that someone is willing to pay for with modest infrastructure investment. If crypto completely lithobrakes, they'll just be out the cost of the crypto infrastructure minus what they can sell it at auction, right?
The electricity is in the wrong place for a lot of that. One of the big things missed about cryptocurrency mining is that it can happen anywhere as long as you have a modest communication pipeline to the rest of the world. You could stick it on other planets in the Solar System (particularly, Mercury) and still mine bitcoins. It's a lot more forgiving about infrastructure requirements. The only serious need is that cheap electricity.
(Score: 3, Interesting) by Mykl on Wednesday May 03, @03:57AM (8 children)
The fact that the value of such a volatile product could evaporate overnight?
It's not just that though - it's the opportunity cost of wasting that electricity that could've been invested in more reliable schemes. Rather than putting that electricity to use earning a steady income (or, dare I say it, building an information economy locally), they are "betting it all on black" and could walk out with nothing.
Sovereign wealth funds carry a lot of responsibility. I doubt any financial advisors would recommend putting your retirement funds in Bitcoin, and I would expect that advise to be doubly true for a country.
(Score: 2, Insightful) by khallow on Wednesday May 03, @04:01AM (6 children)
Which as I noted is not much of a risk.
Like?
If your retirement funds were a hydroelectric plant in the middle of nowhere, then crypto is actually pretty low risk for the reasons I already specified. Just be sure to sell them as fast as you make them.
(Score: 4, Insightful) by Mykl on Wednesday May 03, @05:23AM (3 children)
Are you aware that Bhutan shares a border with the largest consumer of electricity in the world? Use your imagination.
(Score: 1) by khallow on Wednesday May 03, @02:43PM (2 children)
And that the border in question is the Himalayas? Rather you need to be aware of that. Routing power from Bhutan to China would require crossing hundreds to thousands of miles of the worst terrain on Earth (aside from some ice fields) for transporting power, plus crossing several major rivers. Maybe China would be interested, they seem fond of spending (or rather squandering) a lot of money on high profile infrastructure projects, but Bhutan wouldn't have the resources.
(Score: 2) by Mykl on Wednesday May 03, @10:37PM (1 child)
A quick look at Google Maps will show you that there is road infrastructure that leads right up to the Bhutanese/Chinese border in multiple locations. Admittedly the strongest connection is through territory disputed between China and India, but there are other locations with existing roads that could be used. Not hard to extend that and have China run services along its existing infrastructure.
If that's too hard, Bhutan's southern border with India has plenty of development, but India's electricity usage is a distant third and would be less attractive.
But hey, buying into the crypto scam sounds like a much better long term investment!
(Score: 1) by khallow on Wednesday May 03, @11:06PM
It can be a good short term investment. Might even pay for a few of those wires.
(Score: 2) by ChrisMaple on Thursday May 04, @12:26AM (1 child)
Refining aluminum requires much electricity -- but it requires mining and an expensive industrial buildup. Surely there are other energy-hungry industries.
There are those who claim that available energy is the primary driver of civilization. Alas, that assumes some underlying conditions like education, stable government, a free society, etc.. There must be some reason that investors are not flocking to Bhutan.
Bhutan's only 2 neighbors are India and China. It's landlocked. The GDP per capita of Bhutan is $3497, China is $13721, India is $2601. If Bhutan became as rich per capita as China, it would be ripe for invasion by that bellicose country. I wouldn't want to be in their position.
(Score: 1) by khallow on Thursday May 04, @04:41AM
There are plenty of other energy-hungry industries. But not much that can operate under the restrictions of the situation: low infrastructure and intermittent operation with fast power ups and downs. What I think is missed here is that there are two kinds of "shovel sellers" in the cryptocurrency rush: the people making the specialized computer gear, and the people providing the cheap electricity. Bhutan is the latter.
(Score: 0) by Anonymous Coward on Wednesday May 03, @08:47AM
This is a government. They could just declare bitcoin to be the national currency.
(Score: 4, Informative) by zocalo on Wednesday May 03, @07:30AM (2 children)
Whatever, the only real outlay for Bhutan is some additional wear and tear on the generating system, and a bunch of Antminers or similar - if it's entirely excess and unsellable capacity, then the power is basically free and would otherwise go to waste. The TFS implies they are converting the tokens into hard cash PDQ to "subsidize power and hardware", but, if they are smart, probably retain a modest float to hedge against crypto price fluctations so they can try to "sell the peaks". Crypto prices are certainly volatile, but as long as they are only expanding the mining farm when the delta between hardware outlay and likely BTC return is large enough to yield a positive RoI, I'm not seeing any significant downsides here at all. For crypto, that's something of a first...
UNIX? They're not even circumcised! Savages!
(Score: 1) by khallow on Wednesday May 03, @02:36PM (1 child)
That bears elaboration. Cryptocurrency mining not only is low infrastructure cost, it can be turned on and off quickly. A datacenter would likely need power 24/7 (though they might be able to shift some demand to cheaper periods). You won't find electricity demand in any other sector that can be so conveniently manipulated.
(Score: 2) by zocalo on Wednesday May 03, @05:01PM
I guess if there are issues with generating capacity during the peak demand periods you could also insert a large scale Tesla powerwall or similar in the line first - viz. Australia's approach - but somehow, I don't think that Bhutan's massive potential for hydro capability is going to leave them with any significant supply/demand issues. The hybrid approach might be useful for other countries that do have a lot of excess but also some peak demand issues though, and that's not just limited to hydro - could be geothermal (e.g. Iceland, the US around Yellowstone/Hawaii), or solar (e.g. Saharan or Middle-Eastern countries) too.
UNIX? They're not even circumcised! Savages!
(Score: 4, Informative) by VLM on Wednesday May 03, @11:30AM
They don't exist.
For the LOLs I tried to find the wikipedia article about Bhutan's industrial baseline loads... the 24x7 factories and 24x7 aluminum refineries. There aren't any.
They could spend billions on long distance power lines or millions on BTC miners, they'll make the same return on the investment. They've got better uses for their VERY limited industrial capital than poles with wires on them LOL.
(Score: 2) by cykros on Thursday May 04, @12:47PM
The risk:return ratio on BTC over any significant amount of time has actually been pretty impressively LOW, based on past performance (which admittedly, is not indicative of future results). Yes, we all love to hear about falls from $60k down to 20k, but compared to the thousands of percentage point climbs, and considering they've been at this for awhile, risking a 66% downside for 1000%+ upside is a pretty nice asymmetric risk profile to many.
Also, bear in mind that mining bitcoin doesn't actually tell you much about their strategy with regard to speculating on it, aside from the speculation involved in buying mining hardware in the first place (which, at this point, seems likely to have paid off with dividends). Depending on the hardware in use, it may also have some use once its outlived its life mining BTC, though this does likely get into some specifics about ASIC chips that get beyond my pay grade.
As for ponzi schemes, the whole world's been part of one since fractional reserve banking and ledger money has been a thing, roughly 4-6000 years ago. Just because more people seem to want to pick apart Bitcoin than care to actually wrap their head around the Eurodollar system doesn't really change that. By choosing to go with Bitcoin, Bhutan has positioned themselves a bit higher up the pyramid, to enjoy a bit more of the Cantillon effect than they likely get to experience in the Eurodollar system. Though, they could absolutely stand to make use of their newfound wealth to buy up more internationally recognized strong collateral to improve their position in that system as well. The Cayman Islands have shown that you don't have to be a particularly powerful or productive country otherwise to have a strong role in that system, provided you're willing to have a favorable regulatory environment.
(Score: 2) by MIRV888 on Wednesday May 03, @04:31AM (1 child)
No seriously, they are.
(Score: 1, Insightful) by Anonymous Coward on Wednesday May 03, @06:13AM
Yes, it's still not easy to leave your home country but at least there's that option.
Like employees of many different corporations vs one big global one. We are unlikely to change Jobs[1] but we can change jobs... 😉
[1] e.g. the Steve Jobs etc of the world...
(Score: 0) by Anonymous Coward on Wednesday May 03, @02:05PM (1 child)
Gotta wonder about the stylebook required that forces Forbes to call power "fuel."
(Score: 2) by cykros on Thursday May 04, @01:00PM
It's Forbes. Their business model these days seems barely beyond a star-watching tabloid, with most content I've seen in recent years being of the variety of "check out how this person/entity got so rich!"
At one point in the past I believe they were somewhat taken seriously in the business community. I'd be shocked to hear them come up in serious conversation at the present.
(Score: 2) by hendrikboom on Wednesday May 03, @02:37PM (2 children)
And when the glacier finishes melting, the whole operation will be over.
(Score: 2) by ChrisMaple on Thursday May 04, @12:49AM
Rainfall in Bhutan varies extremely by region. It looks like rain is adequate for a long term hydro-power source if enough can be stored in the rainy season to last all year.
(Score: 2) by cykros on Thursday May 04, @12:58PM
That just leads me to wonder what's beneath the glacier. Might be a good time to pivot from mining BTC to mining...non-digital assets. Calcium carbide —the country’s main mineral export—limestone, dolomite, gypsum, coal, marble, quartzite, and talc are the primary products of the country’s mining activities. Much of these resource are only currently moderately exploited, no doubt with massive glacial coverage being a bit of an impediment to (safe) access.
(Score: 2) by cykros on Thursday May 04, @01:04PM
"It's also unclear why Bhutan never disclosed the project to its citizens or international partners."
Does the word "kingdom" mean anything to you? Unless there was a clear motivation for the monarch, it'd be unclear as to why they WOULD disclose this operation. Why subject all of your investment decisions to the scrutiny of common rabble who don't even comprise an electoral base?