🇵🇾 The Economist: Paraguay Emerges as a Key Crypto Mining Hub

The Economist published an article titled “Crypto cowboys have found paradise in Paraguay” discussing how Paraguay has become a hub for Bitcoin miners due to its cheap electricity, low taxes, and lax regulatory environment.

They report how the country offers an attractive environment for miners: low taxes, predictable politics, and inexpensive importation of necessary equipment. Paraguay's legal system is also less stringent, and the country benefits from the colossal Itaipú hydroelectric dam shared with Brazil, which provides ample cheap electricity. Miners are allowed to use this power as long as they pay a tariff to the state energy firm, Ande. Currently, around 50 companies legally mine Bitcoin using this setup.

The article highlights how many miners operate illegally, stealing electricity worth an estimated $60m annually. This theft exacerbates Paraguay’s aging power infrastructure issues, leading to frequent power outages in Asunción and other areas. The public outcry has prompted the government to crack down on illegal mining operations with a new law imposing harsh penalties, including up to ten years in jail for energy theft. The Paraguayan authorities have now seized over 10,000 ASIC miners this year from illegal operators.

President Santiago Peña envisions Paraguay as a "center of digital integration" for Latin America, promoting the use of its energy surplus for data centers. He aims to attract more foreign investment by regulating cryptocurrency mining without making it legal tender, as El Salvador has done. Peña’s administration also plans to use the surplus power for hydrogen and ammonia production and a $3b wood-pulp mill.

Despite some local critics, the government is committed to developing a regulated crypto mining sector to boost economic growth and technological progress in Paraguay.

⛏️ In the News

Cipher is considering a potential sale after receiving a takeover bid Bloomberg reports.

Iris Energy's shares dropped after a short-seller report by Culper Research claimed its Childress site was unsuitable for AI or high-performance computing. However, the company clarified it never intended to retrofit the site for these purposes.

JPMorgan reported that U.S.-listed Bitcoin miners reached a record 26.6% of the global hashrate and saw their market cap increase by 29%, with most outperforming Bitcoin.

Putin called for regulation of Bitcoin mining, citing concerns about its unregulated growth leading to power outages in regions like Dagestan.

Northern Data sought to dismiss a whistleblower lawsuit from two former executives who allege wrongful termination and fraud, claiming the suit is baseless and financially motivated amid speculation about the company's IPO plans.

⚖️ Mining and AI

This week, major publications have extensively covered the trend of Bitcoin miners transitioning to AI. Since we’ve already explored this topic in detail, here are some key takeaways:

FT - “Struggling bitcoin miners seek deals with AI companies”

• Bitcoin miners are shifting to AI to offset declining revenues by partnering with AI firms and repurposing their data centers for GPU-based processing.

• JPMorgan analysts report that building an HPC data center takes 3-5 years, with current demand extending this timeline, thus increasing the value of existing infrastructure with cheap power.

• AI companies are renting data center space from miners, exemplified by Coatue Management’s $150m investment in Hut 8 and Bit Digital’s $275m contract.

• Both Bitcoin mining and AI data centers face criticism for their high energy consumption, straining electricity grids, and contributing to environmental issues.

• Google’s greenhouse gas emissions have surged, and Bitcoin mining uses more energy than some countries, such as Pakistan or Ukraine.

CNBC - “Bye-bye bitcoin, hello AI: Texas miners leave crypto for next new wave”

• Lancium and Crusoe Energy Systems have announced a multibillion-dollar deal to build a 200MW AI-focused data center near Abilene, Texas, as the first phase of a 1.2GW expansion.

• As AI data centers expand, concerns about high electricity consumption are growing, with the Electric Power Research Institute predicting a rise in electricity use by data centers.

• TeraWulf is exploring nuclear energy to meet AI demand, and OpenAI CEO Sam Altman supports nuclear energy as a key solution for powering AI workloads.

QUARTZ - “Bitcoin miners are ditching crypto because there's more money in AI”

• Mostly repeats the CNBC article.