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Comment by josephcsible | Hacker News Reader

Wouldn't it make more sense to just let the price of electricity go up?

Maybe it would make more sense to you, but not to most people I think. Electricity has much better uses than cryptocurrency.

Of course it does. It also has better uses than say gaming, so if that is the logic maybe that should be banned, too.

Gaming isn’t a major contributing cause to a country’s energy crisis.

There is a difference between the two. That's like comparing the fuel use or exhaust of a Fiat 500 to that of a cargo ship.

Under your analogy we shouldn't regulate car exhausts before we regulate cargo ships. At any rate, article says 250k mining devices there so the electricity usage is likely more from mining but not orders of magnitude more, and even if it was it would suggest they are not banned because of how useful it is (arguably gaming is even less useful) but because of size. But sure compare to gaming + TVs then.

Analogies are meant to be used once. You shouldn't take them and use them for another purpose.

Does it have better uses than a regular Kazakh citizen being able to use the light bulb in their apartment? Or their fridge?

All big scale BTC mines buy at industrial prices.

You cannot run a mine bigger than what your wiring can support in your apartment.

None of them is using the subsidised residential rate.

Are industrial prices not subsidized?

Certainly not, industrial use subsidises the residential. And businesses have to pay for their grid connection to the premises.

Residential rates are not typically subsidized, they are regulated and billed at cost plus. The only thing that can be called a subsidy is a delay in raising costs. When local utilities are required to supply at a fixed price and that fixed price is less then cost + fixed profit margin, then they are losing money. The remedy for this is to ask their regulators to change the fixed price to account for both the higher expected base rate and their losses during prior periods. The utility commissions which regulate them almost always grant such requests. In extreme cases, CA power crisis, this can bankrupt utilities but in simple shifts of the demand curve most utilities have great credit ratings and can borrow to cover opex during the shortfalls.

It is https://www.globalpetrolprices.com/Kazakhstan/electricity_pr...

There being a price difference between business and residential does not imply a subsidy. It can simply cost more to distribute electricity to businesses, the time power is supplied may be different, and the nature of what is supplied may also be different. Commonly (in the US) businesses have larger supplies, three phase power, and lines and transformers may be buried or harder to access. Midday electricity is also more expensive typically and businesses use more electricity midday (which is why it is more expensive). Further, businesses may be charged real time rates while residential rates lag spikes in price or are averaged over time.

That said, Kazakhstan may subsidize their power, I don’t know.

Kazakhstan's residential utility subsidies are 3% of country's GDP.

This is true in the US generally as well as some countries with already very low energy generation costs. For developing nations residential electricity is normally subsidized.

If only we had an open, decentralised mechanism to figure out what's a better use of a limited resource is.

Oh wait. That's exactly what "cost" is.

Yeah, "cost" is one of the fundamental terms of economics. So is "externality".

What's the externality of using electricity?

Depends on the situation. If there's a shortage (or near-shortage) of supply, the externality could be causing a partial or total blackout.

Pollution (most electricity production is still coal-based), raising electricity prices for everybody else, contributing to an ongoing energy crisis (electricity is going to start being rationed in Kazakhstan).

Electricity is a finite resource.

Put down your Ayn Rand novel for a second and gain some empathy. A few rich crypto miners pricing many people out of electricity is inhumane.

Yup, I'm sure that every time we've let the market do its thing, nobody suffered. I don't really want to get into too much of what's very gross territory, but let's say that a long time ago a certain nation controlling another nation decided that the food from said controlled nation was economically most useful being sold somewhere else.

The locals couldn't afford the "cost".

I'll let you put 2 and 2 together for the rest.

> a certain nation controlling another nation decided that the food from said controlled nation was economically most useful being sold somewhere else.

> The locals couldn't afford the "cost".

That sounds like one of the many soviet famines, which happened exactly because there wasn't an open and free market for said food.

Ireland. It was Ireland.

Except that mechanism optimizes for profitability, not for social good.

In this example it prioritizes made-up computer money for already rich people over a Kazakh citizen having heating or being able to refrigerate food.

It's a terrible mechanism for most things.

Easy, just require an pricy mining permit that can be used to build renewable infrastructure.

I mean, as an authoritarian state whose elections are generally considered rigged they probably could let their peasants choose between darkness and food/heat to ensure wealthy foreigners continued to to use their country to print themselves money, but I'm not sure it would make sense to do so...

No. Role of government is to provide minimum standard of living for general population. A lot of people will freeze in Kaza, as basic necessities are a huge part of their monthly budget and price hike is too severe to handle.

"Let market sort itself" only works if government thinks about it in advance, have fair elections, low corruption, etc.

Cost of natural gas / coal / oil is going up significantly and is a huge problem for all of Europe (not just Eastern) at the moment. A lot of Eastern Europe will have rolling blackouts and need to buy power from Russia / Belarus. Kazakhstan is in the same boat in that regard. I would venture that they are probably still on the USSR power grid as well and can buy easily from Russia / Belarus.

This is such a bizarre comment given the history of price controls and their horrendous outcomes.

Was working fine in Kazakhstan until the crypto folks showed up to utilize subsidized power.

Price controls on utilities in the US are extremely common and successful. There are good ways to implement price controls and there are bad ways. Also, there are just as many examples of bad outcomes when you treat markets which are inherently unfree (i.e utilites, where infrastructure is typically monopolized) as free markets.

Price controls are successful until they aren't. The US can subsidise an egregious amount of bad policies for a very long time I suspect, from agriculture to health, it's not really going to hurt as there are other parts of the diverse economy that can pay.

An better example would be Venezuela, with the largest oil reserves on Earth, they subsidised energy costs to an extreme extent and it was one of the things that drove them into the ground.

People seem to dislike my comment above, yet no one seems to be arguing for petrol to cost ten cents a litre. Why not subsidise fuel if doing such things has such a successful history in the United States?

Different markets have different dynamics, and therefore will react to economic interventions in different ways. Furthermore, the resulting effects of those interventions will have different impacts on consumers, depending on what the thing is. Any policy that is enacted will have multiple effects, and the determining factor in whether a policy will succeed or fail is whether those effects are acceptable.

For example, many EU countries have decided to enact policies that knowingly lead to high prices for motor vehicle petroleum, but this was decided to be acceptable because alternatives like public transportation exist, and are in many cases, preferable. Energy used to heat someone’s home is different in impact.

Venezuela’s economic issues are not a result of subsidies of petroleum for domestic use.

> Why not subsidise fuel if doing such things has such a successful history in the United States?

We do.

I think you mean history of generalized (applied to all products and services) price controls, especially in a planned economy. That definitely did not bring the hoped prosperity.

They seem to mean price controls for a limited number of essential goods and services, to ensure access to them for the least fortunate groups. Energy definitely seems to be part of this even in the most market-oriented societies.

One can look at cheap fossil fuels, and the unwillingness of Western governments to make them more expensive by integrating their negative pollution externalities into their consumer cost, as a sort of ad-hoc price control. Lots of social protests over living standards were triggered by increases in energy costs - the Gilets Jaunes in France for example.

Kicking Bitcoin miners off the grid seems like a great alternative to price controls.

Almost all residential heating in big cities in Kazakhstan comes from cogeneration.

They would've gone bankrupt if they didn't do it with their weather (-40<C°)

So there is clearly a market for bitcoin cogen, either city scale or the scale of a single dwelling.

That makes everyone else in the country worse off.

If mining is a net positive for Kazakhstani miners, doesn't that make the country better off? That's a net export.

No, because everyone pays higher electricity bills while a small number of people benefit from selling their mined crypto.

The traditional solution to that problem is taxation.

How is this different from a factory that uses a lot of electricity to produce shoes that are then exported?

I thought that was a good thing to have in your country, but apparently because this is crypto it is suddenly a bad thing?

A factory provides jobs to locals. A factory stimulates the economy by creating local economic activity (suppliers, logistics, construction, restaurants).

A crypto operation might provide a small fraction of everything above while also producing nothing of tangible value to society.

Doesn't matter how "tangible" the value is if foreigners are paying for it.

Dutch disease is a thing even when the economic value isn’t being frequent dismissed as a Ponzi-adjacent scam, precisely because of foreigners paying for stuff in one sector disproportionately to all the others.

I’m not an economist, so I doubt my understanding is either deep or broad enough to make a proper critique in Kazakhstan’s case.

>If mining is a net positive for Kazakhstani miners, doesn't that make the country better off?

How does that work?

Trickle down economics kicks in, surely.

If mining is profitable that means electricity is costing less than the proceeds of mining. If these miners are Kazakhstani, presumably they are spending the majority of these gains in-country, or are paying taxes on the proceeds. As such this should be a net gain for Kazakhstan, since I assume the majority of people buying the crypto the miners are generating are not in fact Kazakhstani.

This doesn't seem complicated tbh and I'm actually struggling to understand why you wouldn't get this if you generally understand net imports/exports.

I understand the imports and exports for goods that employ people create services and etc.

Coin mining doesn't fit / necessarily that pattern at all.

In the meantime they have power shortages so I'm not sure at all what you're thinking about here... your idea of cheap power is pretty meaningless when there's a shortage.

> If these miners are Kazakhstani

Article implies a lot have moved from China.

> presumably they are spending the majority of these gains in-country

Unevidenced assumption, that they are even spending the gains at all - it's crypto, after all.

> or are paying taxes on the proceeds

Unevidenced assumption, probably false for crypto libertarians.

This is my sarcastic answer of "trickle-down economics" just with more hand-wavy elaboration on how that might work. Amazing!

Trickle-down economics is different.

Read and be enlightened: https://en.wikipedia.org/wiki/Great_Famine_(Ireland)

this is such a narrow line of thinking.

Imaging the hubris required to even suggest that an essential input to daily life should have its price affected by an almost completely useless financial hedge for the elites.

colonial empires have been the worst offenders here, no?

https://en.wikipedia.org/wiki/East_India_Company#Indian_Rebe...

I assumed, based on my experiences as a power consumer, they meant increase the marginal price of electricity above some threshold. That's how electricity is priced everywhere I've lived (US). Maybe it's different on Kazakhstan, although I don't think it'd be hard to implement.

It actually would to some extent in a country with capable infrastructure. But I don’t believe Kazakhstan has that luxury.

Kazakhstan used to have big oversupply of electricity. They used to sell electricity to Russia before bitcoins appeared.

You could tax income from mining instead, which would have the same effect but keep the electricity price stable for everyone else.

A challenge might be in effective tax collection, but it isn't that hard to find heavy electricity consumers.

Thats the weird thing, the more you use, the cheaper it can be delivered to you, same with gas. It should be the other way around, the more you use, the more expensive it should get.

Only if you want miners to have power and residents to be without it.

Capitalism is not the cookie cutter solution to all problems.

Right but that's not the problem here? If there are power shortages then the power companies should increase supply.

which might not be possible in Kazakhstan considering the state of its infrastructure compared to energy use by miners.

There is no capability to increase supply. See my other post - Eastern Europe is out of coal and nat gas. Belarus has excess energy from Nuclear, but is still triaging exports. People will go without power this winter if this isn't done.

So don't rely on coal and nat gas?

What about solar? Wind?

Europe tried that, now they are trying to buy more gas from Russia. See Poland for an example.

The point of that real-time example? Wind and solar are great, but they take time and the infrastructure is not yet there. Nuclear is arguably cleaner and cheaper for the output in the long term. Of course, infrastructure for nuclear isn't there in Kazakhstan yet either.

Yup, the magic pixie fairy will manage to build out electricity producing capacity that takes years to decades to build in days, weeks or months at best.

Both solar and wind are simultaneously underperforming in Europe at the moment because of weather phenomena that reduce wind and increase cloud cover, plus of course winter. There is no solution outside of nuclear, coal, and nat gas. And Europe, save for France, doesn't have enough nuclear to go around.

So the power company should spend tens to hundreds of millions of dollars building out infrastructure for subsidized bitcoin mining? And that makes sense how?

As far as I can tell cryptocurrency's value comes from how much it costs to mine the currency. So that would just affect everyone who isn't mining currency since the miners just offset their costs by selling.

But cryptocurrency can be mined anywhere, not just in Kazakhstan. If only Kazakhstan raises their electricity prices, then the price of the cryptocurrency will basically stay the same, but mining will naturally move elsewhere.

Kazakhstan been intermittently on the 1st, and 2nd place for mining output since fall in Chinese output.

USA regained the firm lead after a few months when bigger Chinese mines moved there.

> As far as I can tell cryptocurrency's value comes from how much it costs to mine the currency

This is wrong. Multiple currencies use proof-of-stake and still have value. Price is determined by demand and supply.

> Multiple currencies use proof-of-stake and still have value.

Are they Bitcoin valuable? Are they as valuable as proof of work? I think not.

> Price is determined by demand and supply.

So the supply is lower because it's harder to mine so the price goes up and because the price is going up demand is higher. It's kinda like diamonds. Pretty useless but because the big companies hoarde all the diamonds they keep the price high and because the price is high people put value in them.

You got cause and effect flipped. Cryptocurrency's value determines how much money can be poured into mining it. If bitcoin is at $60k, the block reward is 6.25 BTC, and there's a block every 10 minutes, then the entire mining bitcoin mining system can only consume 6.25 * $60k = $375k worth of electricity every 10 minutes. If the cost of electricity doubles, all that would mean is that the system can consume half as much electricity.

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