Iran Rewards US$24 for Tips on Illegal Crypto Mining Amid Severe Heat and Power Issues – Is It Worth It?

Iran's Aggressive Crackdown on Illegal Cryptocurrency Mining Amid Power Crisis

In the midst of an intense heatwave that has sent temperatures soaring to unprecedented levels, Iran finds itself grappling with a severe power crisis exacerbated by widespread illegal cryptocurrency mining.

The extreme weather, pushing temperatures up to 49.7°C (121°F), has led to rampant power outages that have severely disrupted both daily life and industrial production across the nation.

The Iranian government, in response to this critical situation, has intensified its crackdown on unauthorised crypto mining operations, which it blames for placing an undue burden on the country's already strained power grid.

Rampant Power Consumption and the Heatwave

Mostafa Rajabi Mashhadi, CEO of Iran’s state electricity company Tavanir, has articulated the severity of the situation, emphasising that illegal mining operations are exploiting subsidised electricity and public networks without proper authorization.

Mashhadi remarked:

“Opportunistic individuals have been exploiting subsidised electricity and public networks to mine cryptocurrencies without proper authorization. This unauthorised mining has led to an abnormal surge in electricity consumption, causing significant disruptions and problems within the country’s power grid.”

This surge in consumption, driven by the energy-intensive nature of crypto mining, has put enormous pressure on Iran’s electrical infrastructure, which is already stretched thin due to the extreme heat.

The Impact of Unauthorised Mining Operations

The Iranian authorities have unveiled a new strategy to combat the problem: a bounty program designed to incentivize citizens to report illegal mining activities.

The program offers a reward of one million toman (approximately US$24) for each report leading to the confiscation of unauthorised mining equipment.

This financial incentive aims to mobilise the public in the fight against illegal mining, which has been described as a major contributor to the current power shortages.

Reports indicate that over 230,000 illegal mining devices have already been confiscated, collectively consuming electricity equivalent to that of the entire Markazi Province.

Such high levels of consumption are comparable to the power needs of a whole Iranian province with 1.4 million residents.

The Broader Context of Cryptocurrency Mining in Iran

Iran’s foray into cryptocurrency mining began in earnest when the government officially recognised it as a legitimate business activity in 2019.

Since then, more than 1,000 licenses have been issued, aiming to harness mining activities to bolster the country’s economy amidst heavy international sanctions.

At its peak, Iranian Bitcoin mining accounted for up to 7% of the global hash rate, but this has drastically fallen to 0.2% as of now, according to the Cambridge Centre for Alternative Finance (CCAF).

This decline is attributed to a combination of regulatory crackdowns and severe power shortages that have forced many operations to cease.

Exact figures on the scale of Iranian Bitcoin mining are challenging to pinpoint, but Elliptic estimates that Iran-based miners accounted for approximately 4.5% of all Bitcoin mining based on data up to April 2020.

Iran’s state-controlled power generation company indicated in January that up to 600 MW of electricity was being consumed by miners.

This level of mining would currently generate annual revenues close to $1 billion and require the equivalent of approximately 10 million barrels of crude oil each year, representing around 4% of Iran’s total oil exports in 2020.

The Dual Role of Cryptocurrency Mining

The energy demands of cryptocurrency mining have sparked a complex debate within Iran.

While the process has provided a means for the country to circumvent economic sanctions by generating capital, it has also overwhelmed the power grid.

The recent Bitcoin halving event in April, which reduced mining rewards by 50%, has intensified the struggle for profitability among miners.

Many have been forced to seek alternative ventures, including artificial intelligence, to sustain their operations.

In Iran, illegal mining activities have reportedly been set up in various public facilities like schools and mosques, where electricity is either free or heavily subsidised, further compounding the issue.

A History of Regulatory Responses

This is not the first time Iran has grappled with the challenges posed by cryptocurrency mining.

The government previously imposed a ban on mining activities in 2021 due to similar concerns about excessive energy consumption.

The ban was later partially lifted, driven by economic pressures from US sanctions.

Now, with the power grid under unprecedented strain, the Iranian authorities are taking a more aggressive stance, believing that public reporting can alleviate some of the pressure on the electrical supply.

Criticism and Broader Implications

The focus on cryptocurrency mining as a primary cause of the power crisis has faced criticism from various quarters.

Some experts argue that the real issues lie in grid mismanagement and the substantial investments needed to upgrade the infrastructure.

Despite these criticisms, the Iranian government’s crackdown reflects its broader strategy to manage energy resources more effectively.

While cryptocurrency mining offers substantial economic benefits, it also presents significant challenges in terms of energy use and sustainability, highlighting the complex interplay between technological advancement and resource management.

The situation in Iran projects the broader global debate about the energy consumption of cryptocurrency mining and its implications for national infrastructure.

Iran isn’t the only country facing this issue.

Around the world, countries are struggling with the energy demands of cryptocurrency mining.

For example, in May, Paraguay closed down multiple illegal bitcoin mining operations that were consuming enough electricity to power an entire city.

As the country navigates this crisis, the dual role of cryptocurrency mining—as both an economic boon and a burden on resources—remains a contentious and pressing issue.

Is a $24 Reward Enough to Combat Iran's Energy Crisis?

As Iran dangles a US$24 reward for tips on illegal crypto mining, one must question whether this financial incentive can truly alleviate the nation's energy crisis.

With the power grid buckling under the strain of unauthorised mining operations, the real challenge might lie beyond incentivizing citizen reports.

While the bounty system could mobilise public participation, it might only address a symptom rather than the root causes of energy mismanagement and infrastructure inadequacies.

The broader issue of balancing economic benefits from cryptocurrency with sustainable resource management demands a more nuanced approach than mere financial incentives.