Bhutan, a landlocked country in south-central Asia, has a population of nearly 800,000. Its economy depends on agriculture and forestry, mining, manufacturing, finance, and trade. However, of late, this small scenic country, tucked in the great Himalayas, has been gaining a reputation for something new.
The country has overtaken El Salvador in Bitcoin ownership, holding the assets over two times more in quantity. This insight became public due to an X post by Arkham Intelligence, a public data application that enables users to analyze blockchain and crypto activity. We shall first look into the tweet briefly and then delve deeper.
The Arkham Intelligence Tweet on Bhutan’s Crypto Holdings: How Much BTC and ETH?
The Arkham Intel official X handle claimed to be the first to identify addresses that held Bhutan’s crypto holdings publicly. The X post listed four assets:
- Bitcoin
- Ethereum
- Binance coin (BNB)
- Matic
The detailed listing said that the small Himalayan country had more than 13,000 Bitcoins, totaling more than US$780 million at nearly US$60K each. Other than Bitcoin, Bhutan had ETH, BNB, and MATIC holdings, according to reports. But these assets and their amounts were negligible, now summing up to a mere US$40 in value.
However, another report suggested a notable movement towards Ethereum as well. The movement was not from Bhutan’s national authorities but from its user population. Wallets tied to the Himalayan kingdom held 656.013 Ethereum (ETH), worth approximately $1.5 million.
Bhutan is the fourth country to hold Bitcoin in a significant volume. As of August 2024, governments held 2.2% of Bitcoin’s supply. The US was the largest holder, with 213,246 BTC, followed by China with 190,000 BTC, and the UK with 61,000 BTC.
With this X post and other related information as the backdrop, we shall now open up our detailed inquiry into the country’s crypto vault with Bitcoin.
The Crypto Accumulation Strategy of Bhutan
The Bitcoin holdings of Bhutan caused much curiosity. The volume of the holdings was close to 28% of Bhutan’s estimated 2023 GDP of nearly US$2.7 billion. Earlier, El Salvador had gained a reputation for holding Bitcoins as part of its national economy. However, Bhutan has surpassed El Salvador by holding more than twice the value of El Salvador’s, which stands at US$335 million.
If we compare the per capita holdings of these two countries, Bhutan is ahead of El Salvador by a significant margin since Bhutan’s population is only 12% of El Salvador’s population.
However, as Rome was not built in a day, the crypto holdings of Bhutan are not an overnight phenomenon. It took at least five years for the country to gradually and somewhat silently build this stock.
According to reports, the country’s foray into the crypto space began in April 2019, when the digital asset was valued at US$5,000—much less than what it is valued today. The onset of the pandemic saw the strategy and operations spread their wings further. Disclosures on major investments and information started coming in between 2022 and 2023. Currently, as suggested by reports, the country is in an expansion mode, expanding its mining capacity.
What makes Bhutan stand out from the rest of the national economies that hold Bitcoin is its involvement in mining. In the next segment, we look into the process of Bitcoin generation.
How Does Bhutan Generate BTC?
The Kingdom of Bhutan has abundant hydroelectric resources. Its rivers, fed by Himalayan glaciers, adequately support this power generation potential. It is technically feasible for the small kingdom to generate 23,760 MW of power, which could power as many as over 17 million average American homes, equivalent to supplying the energy needs of a city like New York twice over. The generation of hydropower accounts for 30% of Bhutan’s GDP.
Bitcoin mining operations require a robust power supply. Studies suggest that Bitcoin’s annual energy consumption needs fall between the range of 91 and 150 terawatt-hours since it involves a complex and energy-intensive Proof of Work mining process. According to an ESG study, more than 23% of all Bitcoin miners use hydropower to run their setups.
Bhutan recognized a match between demand and supply here. It realized that its supply of abundant green energy could mean powering large-scale Bitcoin mining operations without compromising the local environment or sustainability goals.
With the onset of the pandemic, the country also suffered from declining tourism revenues, which constituted a large part of Bhutan’s GDP. According to journalists Iain Martin and Sarah Emerson, who were closely following the development, Bhutan, at this crucial juncture, realized that it could diversify its revenue stream by monetizing Bhutan’s surplus energy for Bitcoin mining.
The Role of Druk Holdings and Investments (DHI)
Source: Bhutan Broadcasting Service
DHI works with the purpose of safeguarding and enhancing national wealth for all generations of Bhutanese through prudent investments.
The company’s current holdings of 24+ portfolio companies span a diverse range of industries, from energy, telecommunications, banking, and aviation to natural resources, pharmaceuticals, and investments abroad. It is also engaged in mining digital assets within Bhutan.
While entering the crypto assets space more than five years ago, the company borrowed some digital assets as a loan from BlockFi and Celsius, which later went bankrupt. According to DHI CEO Ujjwal Deep, the company did not lose any money in the borrowing, and everything was paid back and settled with no dues.
However, once this news dropped in the public domain, reports came out of DHI striking a collaboration with Singaporean bitcoin mining giant Bitdeer wherein the two entities revealed plans for a $500 million “green crypto mining” fund aimed at leveraging Bhutan’s renewable energy resources for blockchain technologies.
We will delve deeper into this aspect further in the coming segment. But before that, we must have the context right as far as DHI’s involvement is concerned. The operations of DHI and its purpose are directly linked to Bhutan’s national economic prosperity. According to reports published in June 2023, DHI was considering selling a portion of its bitcoin holdings to fund a 50% salary increase for government officials. The move was targeted at compensating for the Kingdom’s dwindling foreign currency reserve.
Therefore, any step that DHI would take would mean utilizing the country’s resources for its prosperity!
The Use of Bhutan’s Hydropower
Bitdeer Technologies group, a Nasdaq-listed company, collaborated with DHI to create eco-friendly and carbon-free digital asset mining operations in the Kingdom of Bhutan. For Bitdeer, the purpose was to utilize Bhutan’s zero-emission energy to support blockchain technologies.
The green crypto fund, mentioned earlier, was targeted at creating a platform to develop international stakeholder networks that will contribute to Bhutan’s tech sector. For DHI, the goal was to enhance the lives of Bhutanese people by opening up a new revenue stream and also creating employment opportunities in various fields, including engineering, project management, and supervisory and supportive roles.
April this year, the two entities jointly announced that they would invest in increasing their mining project’s capacity sixfold ahead of Bitcoin halving. By now, it had become a widely known fact that Bhutan had been mining Bitcoin with hydropower for a long time, at least since the time Bitcoin was priced at US$5,000.
According to Arkham Intel, Bhutan has constructed Bitcoin mining facilities in multiple locations, with the largest being on the site of the now-defunct Education City project. Arkham also said in an X post that “Unlike most governments, Bhutan’s BTC does not come from law enforcement asset seizures, but from Bitcoin mining operations, which have ramped up dramatically since early 2023.”
A report published in Forbes identified the sites of what appeared to be four mines run by the Kingdom. The identification relied heavily upon sources derived from satellite imagery from Planet Labs, Satellite Vu, and Google Earth.
The mining centers were long rectangular units with data center cooling systems and high-capacity power lines and transformers that connected Bhutan’s hydroelectric plants with the sites. Below are the details received on some of the sites.
Pilot Location For Bhutan’s Bitcoin Mining Efforts Near Dochula Pass
According to available satellite intelligence, earthmoving began on the site in 2020, with construction appearing to have finished in late 2022. The site comprises a cluster of green and white-roofed mining units enclosed by miles of forest. Reportedly, the site is completely hidden from unknowing passersby and enclosed by miles of forest.
Trongsa and Dagana: The Location for the Second and Third Units
Trongsa is a town east of Thimphu, while the third location is in the heavily forested district of Dagana. Interestingly, the third mining site is near a middle school built for children belonging to the rural community.
The Education City Mining Center
It is reportedly the fourth and largest mining site. It is built on a US$$1 billion government megaproject called Education City. Reportedly, the mine runs alongside the country’s first paved road, the Phuentsholing-Thimphu National Highway. However, it is hard to identify amidst the mountainous terrain. According to insights derived from available satellite imagery, the site had its construction begin around December 2021, coinciding with the import of $193 million in “processing units,” according to customs data from the Ministry of Finance.
However, there is a fifth possibility that believes that none of these sites is the largest. The largest could be the one that was set up by Bitdeer and DHI. The groundbreaking of which happened on a mine in the southern town of Gedu, according to satellite imagery from Planet Labs, bringing 100 megawatts (MW) online in August.
DHI, as it owns Bhutan’s national power company, is responsible for supplying electricity to the site. According to a July update by Bitdeer, the company already had 11,000 miners and had ordered an additional 15,000 machines.
Altogether, Bhutan’s use of renewable hydropower to mine Bitcoin is in full swing and could be far larger in scope and potential than we ever imagined it to be. But is Bhutan the only country that utilizes green energy for Bitcoin mining? Is it in the nature of digital assets to allow for ‘geographically stranded energy’ to be monetized? Are there any other similar examples? We will discuss that in the next segment.
Bitcoin Mining through Geographically Stranded Energy
According to a recently published report, Bitcoin miners are increasingly turning to hydropower, particularly in regions like Quebec, where hydroelectric resources are adequate.
In Europe, Iceland is leveraging its geothermal energy to run renewable energy-powered mining. It has a naturally cold climate, which reduces the need for additional cooling infrastructure, making mining operations more energy-efficient.
In the United States, mining companies in Texas are leveraging the state’s abundant supply of solar and wind energy. One of the major advantages of Bitcoin mining is its flexibility, which allows for the stabilization of the grid by consuming excess renewable energy during periods of low demand, which in turn enhances grid reliability.
Publicly traded mining companies in the US are increasingly utilizing renewable energy. Since we have discussed nearly all stakeholders involved in this field, we would briefly touch upon the commercial company setting before concluding.
Cipher Mining Technologies Inc. (NasdaqGS: CIFR)
Cipher Mining claims to be an industrial-scale Bitcoin mining company dedicated to expanding and strengthening the Bitcoin network’s critical infrastructure in the United States. It works towards a future where a digitally native, open-source network for value transmission and storage would thrive.
A strong focus on utilizing renewable energy sources helped Cipher secure some of the lowest power costs in the industry, averaging 2.7 cents per kilowatt-hour. The company’s commitment to sustainability is highlighted by its investment in renewable energy, particularly wind power.
Cipher currently has two sites:
The 40MW Alborz site was a joint venture in 2022 between Cipher and renewable energy firm WindHQ. Similar to the case of Bhutan, the Alborz JV of Cipher had received a two-year $46.9 million secured credit facility from crypto lender BlockFi.
Cipher believes its renewable energy focus could be profitable in the long run from a policy perspective as well. The focus, as believed by the company, could influence regulatory approaches to Bitcoin mining, particularly in jurisdictions that prioritize sustainability. The company believes that policymakers might view Cipher’s model as a template for balancing economic growth with environmental responsibility, potentially shaping future regulations.
In the second quarter of 2024, Cipher Mining reported a GAAP net loss of $15m and a non-GAAP adjusted loss of $3m. However, it also reported acquiring an additional 1.7 GW of power capacity suitable for HPC infrastructure or bitcoin mining.
Although such speculations are always a thing of the long-term future, there is no doubt that renewable energy will increasingly have a bigger role to play in powering crypto mining.
Concluding Words
The path that Bhutan has shown can be followed by many other nations, as the combination of renewable energy and crypto mining can enhance grid reliability in several ways. Flexible in their energy consumption, Bitcoin mining can adjust usage based on grid demand.
The strategy would be helpful from a load-balancing perspective, too. By strategically placing mining operations near renewable energy sources, excess energy that might otherwise go to waste can be utilized for mining.
Not only would this help balance the load on the grid, but it would also ensure that renewable energy is effectively utilized. This creates a favorable scenario for Bitcoin miners to increasingly partner with energy companies to develop grid infrastructure, particularly in remote areas where traditional grid access is limited.
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