Venezuela's Bitcoin mining sector in the midst of stringent government regulations faces challenges, with recent directives disconnecting miners from the national power grid. Despite crackdowns and shutdown orders, small-scale clandestine miners are keeping the market alive through innovative strategies.
Clandestine Miners Sustain the Industry
In response to the government's move to cut off Bitcoin miners from the power grid, the digital mining industry in Venezuela faced a crisis. Companies offering mining services scrambled to adapt, resorting to auctions and other creative solutions to overcome the challenges.
Despite the adversities, Bitcoin ASIC miners are still being sold in the Venezuelan market. Advertisements on social media platforms like Instagram feature offers such as bundles of ten used S19J Pro models from Bitmain for $11,000. Crypto Tools CA, a vendor in this space since 2020, is prominent in providing mining equipment and services.
The value of Crypto Tools' offer lies in the combined power of the ten Bitmain S19J Pro ASICs, capable of generating over 1,100 terahashes per second (TH/s) for the Bitcoin network. This enhances the network's processing capacity, increasing the chances of mining rewards.
Reports indicate that these miners are imported used devices, sourced mainly from China, reflecting the production costs in that region. However, the regulatory ambiguity in Venezuela poses a challenge, with digital mining activities prohibited from the national power grid, attributing mining operations to recurrent power outages affecting citizens.
The government's crackdown in May resulted in the confiscation of over 11,000 Bitcoin miners and the closure of numerous mining facilities. This has had a chilling effect on businesses in the mining services sector. While some have paused operations awaiting regulatory clarity, others like Crypto Tools continue to operate.
Venezuela's digital mining industry faces additional hurdles due to the absence of a regulatory authority for more than a year. The National Superintendent of Crypto Assets (Sunacrip) was embroiled in a corruption scandal, leading to a $20 billion loss. Sunacrip's intervention in March 2023 halted mining operations forcibly.
In the face of these challenges, small-scale miners persist in operating covertly. For instance, a miner in Caracas runs 60 mining machines clandestinely, unnoticed by authorities. These operators argue that their activities are crucial for the sector's survival, providing income for families and operators who have adapted to underground operations.
Despite the risks, small miners mitigate their exposure by setting up operations in discreet locations, viewing covert mining as the safest option in Venezuela amidst the government's stance. Some miners suggest that bribes can resolve situations in the event of government raids.
However, the future of these small operations remains uncertain. Without the ability to upgrade equipment essential for ongoing operations, their sustainability under current market conditions is questionable.
Jesús Montilla, CEO of Crypto Tools, highlights the significance of small miners in sustaining the market, emphasizing their adherence to energy consumption limits set by Corpoelec. Thus, these small-scale miners play a vital role in supporting the industry's commerce and indirectly creating employment opportunities.
Conversely, some industry stakeholders argue that small miners contribute to energy consumption without significant economic impact, attributing the country's cryptocurrency ecosystem's liquidity and trade volume mostly to larger farms, now inactive.
Despite varying perspectives, the resilience of small-scale clandestine Bitcoin miners persists, upholding Venezuela's digital mining industry through regulatory and economic turmoil.
