Turmoil in Kazakhstan over a country-wide uproar sparked by skyrocketing gas prices has led to the country's state-run internet service provider's shutdown. The move left 98% of the country without an internet connection.

Kazakhstan was one of the beneficiaries of China’s mining ban which caused a massive relocation of hashrate out of China. The country is an attractive location for bitcoin miners to set up operations due to the country's abundant low cost energy. 

As of August 2021, 18% of the Bitcoin hashrate was being produced by miners in Kazakhstan according to data from the Cambridge Centre for Alternative Finance. This made Kazakhstan the second highest contributor to the bitcoin hashrate prior to internet outage which has coincided with a reduction in global hashrate of approximately 13%. The US currently sits at the top of this ranking with an estimated 35% of the global hashrate located throughout the country.

What happened?

The crisis started shortly after the government of Kazakhstan removed the price caps of liquid petroleum in the country. The move sent gas prices skyrocketing, doubling in cost overnight.

Violent protests took place across the country, pressuring the current administration into an untimely resignation. Shortly after the cabinet was removed, Kazakhtelecom shut down the country’s internet.

The disruption to the internet is extremely damaging for the country's economy as it's highly dependent on the data center and IT industry. In recent years, revenue brought by bitcoin mining has represented a growing percentage of the nation’s GDP.

The Data Center & Blockchain Association estimated that the country would bring in over $3 billion from all cryptocurrency mining activity. However, Wednesday’s events could potentially jeopardize Kazakhstan’s reputation of relative political stability in the region and hurt future potential bitcoin mining investments in the country.

As of the writing of this article, riots and protests continue to be held and the country remains disconnected from the internet. Reports of Russian troops entering the country have surfaced as well as orders from the country’s authoritarian leader authorizing troops to fire without warning, erupting in more violence from both sides.

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