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Thursday February 25, 2021

Why is electricity an important source for cryptocurrency production?

Many people confuse digital currencies with cryptocurrencies, unfortunately many people have wrong information about these two currencies and do not differentiate between them.

As for digital currencies, they are ready-made currencies that do not need mining, and are not encrypted. These currencies are linked to central banks, and are quite similar to fiat currencies, such as the “digital yuan” and the “Deem” currency expected to be issued in the coming months.

As for cryptocurrencies; They are currencies that are not ready to be acquired, are not linked to banks and are also decentralized, such as “Bitcoin” and “Ethereum” and other cryptocurrencies.

This type of currency is based on a complex encrypted system, and obtaining it is through blockchain technology and through the mining process – that is, extracting the cryptocurrency through complex algorithmic problems – and to solve these complex algorithmic issues, computers are needed. Specialized in mining, with extraordinary capabilities, and it needs a lot of electrical energy, because solving these problems needs a lot of electricity.

Cheap energy … the magic lamp of cryptocurrencies

Determining the value of the fiat currency rate depends on two systems: the fixed exchange rate system, and the floating system. Of course; These currencies are linked to central banks and are affected by several factors: supply and demand, exports and imports, possession of a reserve of hard currencies with central banks, and many other factors.

However, cryptocurrencies have a completely different system, as they are not linked to central banks, and their value depends on: supply and demand, and mining operations in the cryptocurrency.

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Mining operations, in turn, depend on computers with supernatural capabilities, specializing in mining, and these devices require huge amounts of electricity, and therefore investors in cryptocurrencies rely on low-cost energy, so the lower the mining cost, the greater the profits of the process of extracting the cryptocurrency.

We can say that cryptocurrencies are based on cheap energy, and we can say: Energy is the backbone of cryptocurrencies, so it is very important to provide sufficient amounts of energy at a cheap cost.

We notice recently that many countries that have a surplus in electric energy have exploited it by extracting cryptocurrencies, and recently many oil companies belonging to the countries of Russia and Norway have focused their attention on mining cryptocurrencies, and investing the associated gas from their oil fields, to convert it into electricity And its investment in cryptocurrency mining.

We can also add Iceland. Which is exploiting its “underground” geothermal energy – a renewable energy – to invest in the mining of cryptocurrencies.

Ukraine is also carrying out several studies to take advantage of its excess nuclear energy in its investment in cryptocurrency mining.

In general, Bitcoin, which is the queen of cryptocurrencies, consumes about 0.24% of the global total for electricity production.

Iraq is located on the exact opposite side of these countries, as it annually loses billions of dollars, due to the burning of gas associated with the extraction of oil, without thinking of investing in it to provide electricity to citizens, or in the process of mining cryptocurrencies.

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Cheap energy is of great importance to investors in cryptocurrency mining, an example of this: the cost of extracting a currencyBitcoin“In Venezuela, it makes it the cheapest country to extract it (531 dollars), and in South Korea, which is the most expensive to extract around the world (26 thousand dollars), and in America the cost of extracting it (4,758 dollars), and in China the cost of extracting it (3,172 dollars), and in Russia the cost of extracting it. ($ 4,674), according to a report issued by Elite Fixtures, by analyzing the costs of mining Bitcoin in relation to electricity prices in 115 countries around the world.

The three largest cryptocurrency mining farms in the world are located in America, China, and Russia, and 50% of the total mining operations around the world are located in China, according to a report issued by Bitooda, a company specialized in cryptocurrencies, and the market value of cryptocurrencies exceeded 1.5 trillion dollars, and day after day, the market value and acceptability of giant financial institutions increases.

Briefly; Electric energy has become an important logistical source for cryptocurrencies, and whoever has more electrical energy will have a larger balance of cryptocurrencies through mining operations.

These are all indications that the global economy is on the verge of radical changes, and it is expected that the economically advanced countries will: It will increase its interest in cheap electricity, and it will benefit from its surplus electricity, to invest it in making money, by mining cryptocurrencies.

The most important advantage of cryptocurrencies is that their creation is not limited to governments, or through central banks, as a programmer or a team of them, or a company, can create their own currency.

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