Marina doesn’t need to know what is going on inside the machines hissing at her modest Siberian cottage to appreciate that it’s making her a lot of money.
The 64-year-old – an early adopter in what has become the Bitcoin capital of Russia – has made thousands of pounds from mining cryptocurrency to top up her state pension of £120 a month.
“To be honest, I still don’t fully understand how this thing works,” she told The Telegraph over tea at her recently refurbished two-storey wooden cottage just outside the city of Irkutsk.
“The idea that I have money land into my account every month warms my heart as a pensioner.”
Marina’s is just one of over 14,000 electricity – intensive cryptocurrency-mining households in Irkutsk, which has the gift of Russia’s lowest energy prices.
The Bitcoin gold rush here was given an extra boost after China banned digital coin companies earlier this year, partly on environmental grounds.
But now Russia, too, is considering restrictions.
The local electricity company in Irkutsk is sounding the alarm. And not because they are envious of pensioners making extra cash out of their basements.
“Irkutsk is surrounded by a belt of Bitcoin miners, and they overload the power lines that are not designed to handle such an amount,” Oleg Prichko, general director of Irkutskenergo, told The Telegraph.
The suburbs of Irkutsk are dotted with dozens of legal cryptocurrency farms like the facility of Berlin-based Cyberian Mine at a disused factory where The Telegraph on a recent visit saw about 5,000 machines sitting on floor-to-ceiling shelves, their hiss and the roar of ventilation so loud that employees have to wear ear muffs.
The mining rigs stacked in the industrial building just off a snowy road in a pine-tree forest make one Bitcoin, or roughly £36,000 at the current exchange rate, every day for foreign investors who pay for hosting services here.
Mr Prichko of Irkutskenergo has no problem with legal mines which pay four times as much as households for electricity and are hooked up to industrial power lines. It is the residential areas that make him worry: Households power consumption in the Irkutsk region is projected to add over 50 percent this year to about 9 billion kW per hour, and quarter of that is taken up by those Mr Prichko described as “illegal miners who hide in barns, garages and bathhouses and don’t pay taxes to anyone.”
Over 14,400 households in the area, compared to 8,000 last year, are estimated to be engaged in Bitcoin mining.
“We’re lucky we had a warm autumn and a warm start of winter this year: otherwise we would have faced constant blackouts by now,” Mr Prichko told The Telegraph in mid-December as temperatures outside plunged to a balmy – 22 degrees Centigrade.
Irkutsk boasts Russia’s lowest energy prices at just 1 ruble (1p) kW per hour compared to an average of 21p in the UK. The region hosts four Soviet hydroelectric power stations built to harness the power of mighty Siberian rivers and provide local aluminium smelters with cheap electricity.
Bitcoin miners in Irkutsk are a diverse bunch but most of them had been seeking to make use of their entrepreneurial skills as Russia’s economy began to shrink after the 2014 annexation of Crimea, leaving private businesses struggling for survival.
As the pressure to tax Bitcoin miners or ban cryptocurrency mining is mounting, Irkutsk residents insist they are only saving the Kremlin the trouble of dealing with popular discontent over declining living standards.
“People in Irkutsk have found a way to make money: “Putin should say ‘thank you’ for that,” Ilya Klots, who owns a Bitcoin mining hosting company, told The Telegraph.
Vladimir Putin, the Russian president, initially lamented “high risks” and volatility associated with Bitcoin, but last month he signalled tolerance of cryptocurrencies, saying that it could be used for savings in the future.
Top Russian officials are also zeroing in on Bitcoin miners: the Russian prosecutor general last month said the use of cryptocurrency in criminal activity was “worrying” while the chairman of Russia’s Central Bank spoke against Bitcoin as something which is “fraught with high risks for private investors due to a high volatility.”
The Central Bank is also reportedly mulling over an outright ban on cryptocurrency in Russia, Reuters reported last week.
In an extraordinary gesture of desperation that upset many Bitcoin miners in the region, local governor Igor Kobzev in a confidential memo to Russia’s energy minister this autumn complained about a “skyrocketing electricity use in the region” fraught with “accidents.”
Irkutskenergo, the region’s main electricity company, insists that it cannot deny service to suspected Bitcoin miners as it is obliged to provide as much as electricity to households as it has the capacity for, and it has no right to ask if the customer wants to build five heated pools or install 100 mining rigs on their property.
The energy company was desperate enough to launch private investigations into suspected illegal farms in order to seek damages in court.
Yevgeny Vlasov, a senior manager at the local energy company, turned into something of a sleuth this year as his team tour sleepy streets of the suburb of Shelekhov, taking pictures of the suspected sites with thermal imaging cameras to prove that the owners have high-performing equipment behind their metal doors and high fences.
One property tucked in a pine-tree forest, listed as a residential area with an overall permitted electricity capacity of ten times the average household, on a recent visit did not display any signs of life: Only several shipping containers hooked to power lines stood on the empty plot of land and a dog barked at reporters from the other side of the wooden fence.
Irkutskenergo has filed dozens of lawsuits to the tune of 73 million rubles (£743,000) against suspected miners as Mr Vlasov and others have been compiling data to prove that those consumers ought to switch to business rates.
In its first court win, the energy company overturned the claims of a local Evangelical church, which ran up to 500,000 kW per hour in one month alone, arguing that it needed the electricity for performing religious rites.
Private miners view the lawsuits and raids as a payback from a greedy oligarch: Irkutskenergo is indirectly controlled by the industrial conglomerate En+ which was majority-owned by billionaire tycoon Oleg Deripaska until he divested from his businesses under the threat of US sanctions in 2018.
One clandestine cryptocurrency miner who keeps 20 mining rigs hissing in the back of a garage on his late grandfather’s tiny plot of land just outside Irkutsk laughs at the idea that people like him endanger power supply.
“My neighbours know very well what I do here,” the middle-aged man told The Telegraph at his garage at around midnight as he was late from his day job at a legal Bitcoin mine dealing with a power outage.
“If there were issues with power supply, my neighbours would have been the first to complain.”
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