Author | Blockspace
Translated | GaryMa Wu Blockchain
This article was published on May 14th, and some information may be outdated
Bitcoin mining is spread across the most remote corners of the Earth, including countries you might not expect.
Take Iran as an example.
Despite being hindered by international sanctions and under the oppressive weight of a theocratic regime, the country has a thriving underground "family-style" Bitcoin mining industry. For a long time, Iranians have used cryptocurrencies to break through financial barriers set by sanctions, conduct online shopping, and circumvent domestic capital controls.
In this context, Bitcoin mining plays a crucial role: Iranians can mine Bitcoin using cheap electricity, then convert it to stablecoins like USDT for savings and online transactions. As a result, illegal "guerrilla-style" mining is ubiquitous nationwide, from residential homes to jewelry stores and office buildings.
The scale of underground mining is so large that Masih Alavi, CEO of ViraMiner, estimates its size to be close to 2 GW (gigawatts), far exceeding the approximately 5 MW (megawatts) of legal mining. If you think this number sounds exaggerated, don't be surprised — 2 GW is indeed shocking, especially considering Iran's total power generation was only about 42 GW in 2023.
Regardless of the precision of this estimate, illegal mining in Iran undoubtedly surpasses legal mining, making it a fascinating case study where the mining industry thrives in the shadows, primarily driven by individual actors.
The following text is excerpted from our recent Mining Pod conversation with Masih Alavi, who outlines Iran's unique Bitcoin mining industry.
Q: Could you briefly introduce the current Bitcoin mining landscape in Iran? Can you provide an approximate megawatt estimate, if possible with precise numbers?
A: Certainly. Before the government officially intervened in the mining sector, Iran had about 300 megawatts of mining capacity in operation. After government intervention, I remember initially around thirty-plus people applied for mining licenses.
Later, about 700 applications were approved for mining projects, but ultimately only around 300 projects were government-approved to operate industrial-scale Bitcoin mines. However, currently, only about 5 megawatts are actually in operation.
If we count all issued licenses, there's a total potential capacity of about 400 megawatts, but most are not yet in production.
Q: So Iran currently only has 5 megawatts of legal mining running?
A: Yes, legal mining is only 5 megawatts. But illegal mining is about 2,000 megawatts, or 2 GW.
[The rest of the translation continues in the same professional manner, maintaining the original structure and tone while translating to English.]
So, I cannot say they are completely illegal, but they are not exactly legal either, falling into a gray area. Nevertheless, about 18 million Iranians own crypto assets, and there are approximately 300 to 600 digital exchanges within Iran, which people use to convert crypto assets into rials or trade locally.
Due to sanctions, overseas exchanges like Binance and Bybit will block accounts once they discover users are from Iran, so people can only rely on these domestic exchanges. Although their depth and liquidity are far inferior to international platforms, they can still meet daily needs.
I believe that if sanctions are lifted, Iran will have enormous potential to align with global markets and exchanges. For example, around three to five years ago, there was a natural gas price increase here that led to public protests, and the government, to suppress communication and unrest, shut down the internet, resulting in a global Bitcoin hash rate drop of about 10% to 15%.
That incident highlighted Iran's important contribution to the global hash rate network - although most mining was illegal at the time. Since then, the government has tried to track miners through IP addresses. But Iranians are very clever; they use router microchips, VPNs, and other tools to hide or change IP, making it difficult for the government to track.
Some wealthy individuals even use Elon Musk's Starlink satellite network to completely avoid monitoring. They also operate small underground mines using gas generators through "hot tapping", bypassing grid regulations.
Q: Some say people mine in mosques? Perhaps not inside the mosque itself, but in its property or basement?
A: Technically, this is impossible. In urban areas, some transformers (we call them "transes") have load limits. If someone mines in a mosque or military base, excessive load could cause system overload or even explosion. So mining in mosques is impossible. People can only choose "silent parts" or other hidden locations.
I'm not defending the government, just technically explaining that you cannot mine in hospitals, schools, or mosques. Now, most people mine in private residences. If the government wants to mine, they certainly have more suitable locations that won't be discovered by the public.
Currently, Iran needs about 3,000 megawatts of electricity, but we don't have sufficient capacity. Electricity here is a national security issue; if power shortages cause blackouts, people will protest - which is extremely dangerous for the government. Therefore, the government must carefully manage energy supply.
Although cryptocurrencies like BTC are often discussed as a means to circumvent sanctions, the government itself is not directly involved in mining; it is entirely a private activity.
Q: In Iran, where do ordinary people purchase mining machines? Which countries do they import from? Are there intermediaries or companies assisting?
A: Most mining machines are smuggled into Iran, primarily from China. People use various Antminers: S9, S9j, even new water-cooled mining machines; also WhatsMiner series like M50, and various Avalon models, both new and old.
I know these details because we were developing the Bureau Miner project and later expanded to industrial mining farms, requiring local mining machine repairs. We sent colleagues to China for WhatsMiner training and invited Chinese technicians to train our team. Now we have about 80 trained technicians who can repair mining machines. Therefore, we have an in-depth understanding of mining machine types operating in Iran.
Q: So essentially, a black market exists for importing mining machines? Are there legal channels for import? I guess you need to first obtain a registered miner identity from the government?
A: Exactly. To operate legally, one must first apply for a mining license. After approval, submit documents to customs including equipment list, specifications, and total required megawatts, importing mining machines from Hong Kong or Dubai. After paying customs and import taxes, they can be used in mainland areas or free trade zones. Mainland areas require tax payment, while free trade zones are tax-exempt.
I remember many Chinese companies previously operated in free trade zones with mining machines, but because the government couldn't provide sufficient electricity, these mining farms were forced to close and have not recovered.
Before the government officially standardized industrial mining, we had clients from Europe and China, and companies like WhatsMiner and Bitmain also had models operating here, such as M3 and M1. However, with intensifying sanctions, they had to shut down all legal businesses. Now, as I mentioned earlier, legal mining scale is only 5 megawatts. These sites, although using brand-new mining machines, might soon stop operating due to high electricity costs - especially now during Iran's peak electricity usage, where the government will prioritize cutting power to mining farms. Therefore, we might drop from 5 megawatts to zero.
Q: To clarify, are these 5 megawatts the total legal mining capacity nationwide, or limited to your company ViraMiner?
A: Not limited to us. But within our group, we have multiple departments: Zero Miner focuses on maintenance, with a 24/7 support team; HashOne is our hardware repair center; we also developed ViraPool mining pool, completely self-developed software, but currently no Iranian miners use it because they fear IP address recording. People avoid local mining pools.
We also have a mining machine hosting department, but currently only Zero Miner and HashOne are operational. In the past, three to five teams were responsible for operating and maintaining multiple mining farms; now only one industrial mining farm remains operational.
Q: Pause here. I want to emphasize: Iranian miners are unwilling to use your pool because they fear IP tracking. I find this interesting.
A: Indeed. We also haven't done any public marketing. The mining pool was initially prepared for private companies we collaborate with, and I don't want to promote it publicly. A few years ago, when the government shut down the internet, Iran's hash rate significantly dropped, an event that deeply made me recognize Iran's contribution to global hash rate.
At that time, Iran had about three to four active mining pools, such as MacD, ViaBTC, and Antpool. However, with escalating sanctions, some mining pools began blocking Iranian users. For example, accessing Antpool now requires a VPN, while ViaBTC and EMCD are still operating.
As for our mining pool, the original intention was to research mining pool economics - by analyzing blockchain raw data and code, we could thoroughly understand the mining ecosystem, such as tracking transactions, statistics on mined and held BTC and its flow. During early analysis, I even drew wallet maps, observing how funds are stored and moved, which was very interesting. But now we've shifted to other projects.
For instance, I don't know if the US has similar situations, but they have private companies providing retail electricity services. We recently created Iran's first online electricity sales platform, focusing on innovation, like this, and other energy-related side businesses.
Q: Two final questions. First, returning to numbers: You mentioned current active legal mining capacity is about 5 megawatts, with approximately 400 megawatts approved but not yet operational. Why is this the case? Are there additional government obstacles or is the registration process too complex?
A: It's due to multiple reasons. As I mentioned, the government continuously increases electricity rates - even for small scales like four megawatts; simultaneously, they still implement outdated and impractical regulatory provisions that make it difficult for miners to operate legally.
The registration process is complex and expensive, and miners are uncertain about how to use the mined BTC. If you want to reinvest earnings, such as building a solar power plant, the government was initially supportive; but if you want to build both a solar power plant and a mining farm at the same location, they will obstruct you. This is discouraging. We've consistently told the government: for new infrastructure - whether solar or gas power generation - investment must be encouraged. Iran is facing energy shortages, and new infrastructure is crucial, even with existing risks.
The global mining industry is accustomed to price fluctuations and difficulty changes, yet still seeks to establish and expand new sites. We also tell the government: "If you want to attract solar or gas power generation investment, mining is one of the best ways."
Iran has about 3,000 gas flares - directly burning gas. If someone wants to connect to generate electricity for mining, the government says: "No, we prefer to burn it." Solar energy is the same. We tell them this is a golden opportunity. Even if Bitcoin disappears one day - such as Satoshi Nakamoto suddenly appearing from somewhere and shutting down the network - these infrastructure will remain and can continue generating electricity.
This is a rational long-term investment. Unfortunately, the government doesn't listen. They still want to control everything, for example, we still don't have a legal cryptocurrency exchange. In contrast, countries like the United States quickly adjust laws to accommodate new technologies like blockchain, while here, the government's instinct is to restrict and control. They want to monopolize benefits rather than share or collaborate, which doesn't work in today's world.
Therefore, legal mining is struggling. I can tell you - within three to four months, the situation will be worse. But they cannot completely stop it. The hidden technologies used by illegal miners are very advanced, causing headaches for the government. Three days ago, I just met with some government experts and was stunned by the evasion methods they showed me. Some methods are truly amazing.
