Abkhazia’s illegal bitcoin miners face new threat from thieves

  • Abkhazia has banned bitcoin mining to stem energy crisis
  • Miners continue to work underground, facing higher risks
  • A man was killed in a robbery attempt in October

TBILISI, January 6 (Thomson Reuters Foundation) – When Valeri checked out the garage in Abkhazia where he had set up an illegal small-scale bitcoin mining operation one fall morning, he found the door open. Thieves broke in overnight, taking with them 20 mining servers worth about $ 10,000.

“They completely cleaned up the place,” said the 31-year-old from the Black Sea region, who preferred not to use his real name, adding that the theft had left him “angry and frustrated. “.

It was not an isolated case. Cryptocurrency miners say Abkhazia has been hit by a wave of burglaries – some of them violent – since authorities banned energy-intensive activity to stem an energy crisis in 2020.

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In October, five men armed with Kalashnikov rifles and rifles accidentally killed one of their own after opening fire on thieves who broke into a country house to steal mining servers, according to the office of the local prosecutor.

And last month, police said they made an arrest after two masked men broke into a house in Sukhumi, the capital, and held a family at gunpoint before escaping with three servers and 150,000 rubles ($ 2,040) in cash.

The wave of thefts is the latest twist in the region’s crypto world, which many locals see as one of the few ways to make ends meet.

Abkhazia separated from Georgia in the early 1990s after the collapse of the Soviet Union.

It is only recognized as an independent state by Russia, which has a military presence there, and a handful of other nations, leaving it largely isolated and underdeveloped.

“If conditions in our little republic were better than they are now, then I would do something else,” said Victor, a 34-year-old bitcoin miner who asked to protect his identity.

FEEDING PROBLEMS

A lush swath of land once the playground of the Soviet elite, Abkhazia experienced a mining boom last year as bitcoin prices skyrocketed.

Bitcoins are generated in a process called “mining,” in which a global network of computers compete to solve complex algorithms.

These computers require a large amount of power to run, with climate experts voicing concerns about the potential of cryptocurrencies to derail efforts to fight global warming.

The crypto craze put Abkhazia’s obsolete energy system on the ropes, triggering blackouts and setting fire to overloaded power plants, which led to the government’s last mining ban in December 2020.

Police set out to search for crypto farms, raiding homes, attics and even restaurants, cutting power cables to mining processors they found. In March, the government imposed heavy new fines on violators.

Abkhazia’s interior ministry told the Thomson Reuters Foundation it had opened “specialized” and “secure” warehouses to contain mining devices seized by authorities, as well as a hotline to report any suspicious activity .

The government blamed the crackdown on easing pressure on the energy grid over the summer – but the crisis has not subsided, with energy use increasing again in the fall.

In October, Abkhazia’s energy company Chernomorenergo urged all residents to “reduce consumption as much as possible”, as it announced further blackouts.

“The ban hasn’t worked at all. It’s that simple,” said Michael Lambert, political psychologist and non-resident associate at the OSCE Academy in Bishkek, Kyrgyzstan, who wrote On the question.

Neither the Abkhazian Ministry of Economy nor the prosecutor’s office responded to requests for comment.

Energy in Abkhazia is so cheap that despite government crackdown, mining has proved too tempting for many residents, Lambert said.

Suspicions that government officials were involved in the affair did little to persuade the miners to unplug, added Maximilian Hess, a researcher at the Foreign Policy Research Institute, a US think tank.

“The region has long been attractive to organized crime and corruption,” he said. “Any local repression will not necessarily be seen as an act of law, but as various factions (…) playing against each other.”

In February, a lawmaker’s assistant was sacked after he was caught smuggling mining equipment from Russia in a government-owned car, in a case that sparked local outrage.

“I won’t stop doing this until our government officials liquidate their own crypto farms,” Victor said.

DIY SECURITY

Unable to seek police assistance due to the illegal nature of their business, crypto miners resorted to their own means of protection.

After a botched robbery, Victor said he outfitted the dismantled factory warehouse where he holds some 140 servers worth around $ 72,000 with indoor and outdoor cameras, motion sensors and a security system. remote notification.

“It cost me around $ 2,000,” he said, adding that violent incidents like the October shooting were an “exception”.

“Server thefts are very common … but mostly carried out by young people because of the low standard of living and the lack of employment.”

Thieves who tried to break into his warehouse earlier this year fled as soon as the alarm went off, he said.

Valeri, who had no such security measures in place, said he tried to locate the thieves himself, but to no avail.

“I have another job, but mining was my main income,” he said. “It’s a really good deal that I really want to do again. Unfortunately now I have no more money to buy the equipment.”

LOOKING FOR SOLUTIONS

The crypto-mining crisis has become increasingly difficult for authorities to manage, with persistent blackouts sparking widespread anger.

“The people are rightly outraged and their outrage is quite understandable,” Abkhaz President Aslan Bzhania said at a government meeting in November.

A few days later, an armed man fired several shots at the headquarters of the energy company Chernomorenergo, before being arrested, the Interior Ministry said on its website.

While police did not reveal a motive, the gunman was hailed as a hero by disgruntled residents on social media, local reports said.

Abkhazia gets most of its electricity from a massive Soviet-era dam it shares with Georgia, which underwent repairs earlier this year and, like most hydropower plants, is experiencing low levels water in winter when energy demand is higher.

To fill the deficit, the government imported energy from Russia, increasing its dependence on the Kremlin – raising concern among the more independent Abkhazians, Lambert said.

Last month, opposition parties staged a large protest in Sukhumi against the government’s handling of the energy crisis, among other things.

The government presented plans to renovate the energy network, put in place a new system to calculate and collect electricity tariffs and create a “technopark” where miners could legally operate.

But Victor is skeptical.

“For almost 30 years after the war, our government was unable or unwilling to restore water and energy infrastructure. So I don’t really understand which technopark we are talking about.”

($ 1 = 73.5425 rubles)

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Report by Umberto Bacchi @UmbertoBacchi, edited by Zoe Tabary. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, which covers the lives of people around the world who struggle to live freely or fairly. Visit http://news.trust.org

Our Standards: Thomson Reuters Trust Principles.

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