I recently spent some days in Kyrgyzstan and met with insiders in the country's #bitcoin mining industry.

In this thread, I share some of the things I learned 🧵

Kyrgyzstan is arguably one of the least-known countries in the world. Here are some quick facts:
- 80% of the country consists of mountains
- Has more than 25,000 rivers, giving it a massive hydropower potential
- Politically unstable with 3 political crises in the last 18 years

The #Bitcoin network is Kyrgyzstan's seventh-biggest export partner, right behind China.

Hydropower generates 90% of Kyrgyzstan's electricity, while the remaining 10% is produced by coal.

Kyrgyzstan’s bitcoin mining industry comprises two groups: legal and underground miners.

Legal miners follow regulations and pay taxes, and underground miners exploit electricity subsidies not meant for them by operating under the guise of other industrial activities.

The underground miners often have close ties to (or are themselves) government officials or other powerful people and can continue operating illegally in the wild west Kyrgyz business environment.

The Kyrgyz government heavily subsidizes electricity for residential and industrial consumers.

The tariff for miners is $0.066/kWh, while it is only $0.033/kWh for other industrial consumers. Miners are thus financially incentivized to operate undercover.

Kyrgyzstan desperately needs new electricity generation capacity.

Luckily, the country is made for hydropower. It could generate up to 143 TWh annually - more than 10 times the current built-out capacity and almost twice the annual electricity consumption of the Bitcoin network.

Legal miners can help finance hydropower development.

Some legal miners operate at and buy electricity directly from hydropower plants. By selling part of the electricity to a miner, hydropower projects increase revenues and reduce risk, making it easier to obtain financing.

Bitcoin miners in Kyrgyzstan have already financed a few smaller hydropower plants in the country and could help finance larger projects if these pilot projects are successful.

Kyrgyzstan also has a large trade deficit and primarily relies on gold mining for its export income. Diversifying the export base with digital gold may be a good solution.

If done right, bitcoin mining is a tremendous opportunity for Kyrgyzstan. But we must remember that this country is politically unstable, and anything can happen.

The bitcoin mining potential in Kyrgyzstan is enormous, but so is the risk.