As Bitcoin continues to grow — and with it, the target on its back — bitcoin miners should be hyper-aware of third-party risks and attempt to mitigate them.
The below is a direct excerpt of Marty’s Bent Issue #1195: “The politicization of hashrate is an attack vector for your miners.“ Sign up for the newsletter here.
The U.S. Treasury came out today and sanctioned Bitriver, a Russian bitcoin mining company that hosts miners on behalf of large miners. Any Americans who have their miners hosted at Bitriver or own any significant amount of equity in the company must stop interacting with Bitriver immediately, highlighting the risk one takes when they don’t control their infrastructure and host their miners in areas that are subject to increased political risk. Political risk comes in many different forms.
Here in the United States, it is politically risky to host your miners in the state of New York as it is run by freedom-hating Malthusians who are dead set on preventing Bitcoin from flourishing within its borders. It was proven to be politically risky to mine in Quebec in the mid-2010s as the government there freaked out and began treating bitcoin miners who were utilizing excess electricity produced by Hydro Quebec like second-class citizens by singling them out and increasing their electricity rates and sales tax. Making their operations unprofitable and, therefore, nonviable. And now, we are learning that it is politically risky to host your miner within Russia if you are a U.S. citizen because the government seems determined to sever Russia’s connection to the western world in reaction to the invasion of Ukraine.
There are many American citizens and companies who are now scrambling to figure out what to do with their miners after the Treasury Department made their order today. Will Bitriver give them their machines back? Will the U.S. government let these people receive their machines if Bitriver is an ethical business and attempts to do so? These are questions I don’t know the answer to at the moment, but are questions miners should ask themselves before loading their operations up with third-party risk.
As Bitcoin continues to grow — and with it, the target on its back — bitcoin miners should be hyper-aware of these third-party risks and attempt to mitigate them to the best of their ability. This is why your Uncle Marty is very bullish on vertically integrated off-grid mining operations that are more distributed, housed in states that respect freedom and property rights and significantly harder to identify and shut down when the government inevitably decides to focus the ire of their manic anti-human insanity on the bitcoin mining industry.
I am a big fan of the incredible work large-scale miners are doing here in the U.S. and Canada, but I do worry that the federal governments in the U.S. and Canada will find them to be easy political targets to pick on in the future. I truly hope this does not come to fruition, but it is hard to argue that they aren’t massive sitting targets that insane federal governments can try to wage attacks against.
I feel terrible that Bitriver and their customers have been dragged into a political shit show and are now being financially damaged because those in the political class are gung-ho on escalating geopolitical tensions as they continue their massive Deep State dick measuring contest in front of the world. Honest, hard-working people are being harmed as the proxy war between warring super powers wages on.
If you’re running a mining operation make sure you take the Deep State dick-measuring contests, the political environment of your local government and the size of your operation into consideration when building it out. All present points of failure and you do not want to concentrate your risk in one area.
