How is it affecting Ukraine’s electricity system?

Ukraine continues to rank among the top countries for cryptocurrency adoption. How is mining working in the country amid the current conflict with Russia?

Analysts at OSINT agency Molfar collected data from July 2023 to June 2024 using various open sources, including archival information and mining pool hashrate. As a result, experts determined the average hashrate by month.

The study found three active mining pools in Ukraine with six miners, which probably consume 33 kW per hour. Also, from the source asictrade.com, 146 types of miners (mining systems) are known.

How much electricity do mining farms in Ukraine consume?

The report shows that Ukrainian miners consumed an average of 616 MW per hour in April and 487 MW per hour in May. Depending on production volume, a steel mill can consume between 200 and 1,000 MW per hour.

Source: molfar

Electricity consumption of Ukrainian miners in April and May 2024 was equal to or greater than that of large industrial enterprises. This is despite the fact that cryptocurrency mining is a relatively new industry.

Ukraine’s total electricity consumption in 2023 was about 15 GW per hour. At the same time, the current account deficit is 9 GW. In March 2024, about 6.7% of the country’s total electricity consumption was consumed by miners.

But compared to global indicators, this is a small amount. For example, in the US, miners consume about 8-10 GW of electricity per hour. So, the electricity consumption of Ukrainian miners in March 2024 was only 10% of that of miners in the US.

Source: molfar

In the warmer months like June and August, the hashrate and electricity consumption decrease. This is because the cost of cooling mining devices increases. Mining becomes less profitable, so fewer people are involved in mining.

Bitcoin mining and home electricity consumption

The average cost of electricity to mine one Bitcoin (BTC) is $46,291. The market price at the beginning of September was $58,000 at the time of the study. Costs and profits will vary in different parts of the world.

Source: molfar

Mining one BTC requires about 110,000 kWh. At the same time, the total consumption of the Bitcoin network is estimated at 176.02 TWh per year. Therefore, if calculated according to prices for consumers in Ukraine, the cost of one BTC will be $ 12,540.

“Of course, this calculation does not take into account other expenses such as equipment and depreciation.”

Estimation of electricity consumption by miners and infrastructure

According to the study, miners’ average electricity consumption between April and June was equal to the needs of 658 hospitals, 3.5 million street lights, more than 36,000 stores and more than half a million air conditioners.

It is also stated that the amount of energy consumed by miners can meet the needs of Ukraine’s largest cities for several days.

“The daily electricity consumption rate of miners (9052 MW per day) provided 3.89 days of uninterrupted work in Kiev and Dnipro. 1 day of mining covers 4 days without power outages in Kiev and Dnipro.”

Maksym Zrazhevskyi, Head of Research at OSINT agency Molfar, noted in a conversation with crypto.news that miners’ consumption significantly affects the functioning of the Ukrainian infrastructure. Miners’ electricity consumption is especially negative in the evening hours, when the country’s population’s electricity consumption reaches its peak.

Therefore, miners are harming the country, because the estimated electricity consumption of miners is equivalent to the consumption of, for example, 770 hospitals, which is vital infrastructure for the country in times of war.

“However, if the situation with electricity generation improves and conditions are provided for legal mining operations, mining could become a boon for post-war Ukraine.”

Legal status of cryptocurrencies in Ukraine

In February 2022, Ukrainian President Volodymyr Zelensky signed the law on virtual assets. According to the new rules, the National Securities and Exchange Commission will regulate the crypto market. At the same time, mining is not prohibited in Ukraine. In fact, it is an activity that involves the use of equipment to obtain assets.

However, crypto regulation in Ukraine is not yet fully established. In March, the Ukrainian government approved a reform plan that guarantees €50 billion from the EU between 2024 and 2027 within the framework of the Ukraine Facility program. The document includes provisions on the cryptocurrency market, among other things.

To combat illegal activities, the government stressed that the relevant law on virtual assets should be amended to take into account the provisions of MiCA (Crypto Asset Markets) and the adoption of taxation of the crypto market.

On the other hand, since the beginning of the conflict with Russia, cryptocurrencies have become particularly popular in Ukraine; another reason for this popularity was the collection of donations for the needs of the Armed Forces.

Prospects and challenges of mining development in Ukraine

Analysts note that the conflict with Russia has exacerbated the situation in cryptocurrency mining. If by the end of 2021 it is planned to build mining centers around nuclear power plants with a capacity of 2-3 GW, then by 2024 such plans look like a ghost.

“The current state of Ukraine’s energy system raises questions about the profitability of this industry. We see that mining electricity costs are often much higher than the energy caps provided to cities like Dnipro and Kyiv. But theoretically, miners could solve this problem by using solar or wind power plants.”

However, Zrazhevskyi is sure that the country is hopeful for mining development because Ukrainians are very passionate about cryptocurrencies. They often choose cryptocurrencies as a way to protect their savings. Also, the low price of electricity makes the country attractive for mining development.

“Ukrainians are actively involved in the cryptocurrency space, and with cheap electricity, the country is likely to become a major hub in the cryptocurrency world. The main obstacles in Ukraine right now are power outages and flawed legislation.”

At the same time, he added that legislative initiatives that would allow for future regulation of the cryptocurrency market, including mining, are currently being considered in Ukraine.