On September 23rd, it was reported that the Venezuelan Government would begin to strictly regulate Bitcoin mining and that all mining operations would be overseen by the State. On November 29th, 2020, The Aurora Intel Network released a twitter post depicting the Venezuelan Army installing Antminer S9’s—a common (and less-expensive) Bitcoin miner developed by Bitmain and released to market in 2016. Additionally, within the last 3 months, the Iranian Government announced similar oversight of any Bitcoin mining operations that takes place within their borders. From heavy-handed regulations to the nationalization of mining pools, nations that are rich in energy are beginning to leverage Bitcoin mining as a means to bring energy to market. I believe this is evidence of one of the most historically disruptive innovations in the upstream energy-production industry. How does this “magic internet money” known as Bitcoin disrupt global markets and international relations? Let’s take a look...
Iran and Venezuela share a couple of things in common—they both have an excessive amount of hydrocarbon reserves. Their interactions within the global marketplace are also sanctioned by the United States. So, instead of trading barrels of oil with another country and ultimately settling the transaction in U.S dollars, these nations are now able to bring their energy to market by converting hydrocarbons to computational work and settling in bitcoin. They are effectively selling their natural resources to the bitcoin network. The United States is aware of these transactions and has even tried to sanction the mining pools that are helping to facilitate the hash rate generated in Iran. Leigh Cuen released an article in March of this year, quoting Mikhael Jerlis, CEO of the Russian EMCD.IO mining pool. Jerlis said, “Big crypto mining pools are rejecting Iranian miners because of sanctions. We don’t give a damn about sanctions. If we get sanctioned, we’d just shut down the company and open a new one.” So, it is safe to say that this battle has already begun.
Could Bitcoin actually replace the U.S dollar as the dominant currency of energy markets? In the same article by L. Cuen, Cuen argued that “…energy experts claim incumbents are complacent about the dominance of the U.S. dollar in oil markets while others may try to force change.” So, is this what we’re seeing with Venezuela & Iran? Are they trying to force the change for their own benefit? Are they trying to push Bitcoin onto the global stage saying, “We deal in bitcoin now”? Well, it certainly appears that way. Nations authorizing and overseeing the direct utilization of natural resources in order to mine bitcoin isn’t the only evidence that suggests these governments view bitcoin as a valuable means of transacting value. In an article published by Bitcoin.com on December 9th, 2020, it was reported that “Venezuela is paying companies in allied countries, including Iran and Turkey, with bitcoin in order to mitigate the effects of U.S. sanctions on its economy.” This indicates that the Venezuelan government perceives Bitcoin as a means to avoid sanctions, and other nation states view it as an acceptable currency to accept goods and services. Bitcoin is getting pushed onto the global stage because it allows anyone (who has access to a primary energy source), anywhere in the world, to bring that energy to market. Without needing permission. Bitcoin is a growing economic force, a serious and emerging energy-demand market that cannot be sanctioned nor shut down.
It’s happening. Bitcoin (mining) is changing the world—forcing centralized collectives to adapt in order to take advantage of this immense and immutable tool known as the Bitcoin network. This incentivizes great engineering minds to take risk and push the limits of economic power generation. As a result, this leads to the expansion of more efficient and less costly infrastructure, which then leads to more consistent, reliable, and affordable electricity on global scale. It seems likely that the upstream energy production industry will be permanently changed due to the symbiotic relationship it shares with the world’s first decentralized digital ledger. What we are witnessing could accurately be characterized as a monetary revolution backed by raw energy. Bitcoin mining is reshaping global energy production and governments around the world are taking notice.
What a time to be alive.