The Bhutanese Leading the way.
If one Googles Bhutan and Bitcoins these days, one will come across online articles from crypto-focused news sites claiming that Bhutan has sold the majority of its Bitcoin holdings and that Bhutan has stopped mining Bitcoins.
This has crept onto some of the social media sites in Bhutan, like Reddit, with Bhutanese asking what is happening.
Druk Holding and Investments (DHI) has said that it is not true that it has sold a large number of Bitcoins or that it has stopped mining.
Instead, Bhutan at the moment retains well above 10,000 Bitcoins, which is the amount of Bitcoins committed by His Majesty The King for the Gelephu Mindfulness City Project.
DHI is also mining at full capacity from its Bitcoin mines, which are under 500 MW in capacity. The Bhutanese looked at the domestic power consumption data, and it showed that a good chunk of it is being used for Bitcoin mining.
The confusion seems to have arisen as these sites are tracking the Arkham site, which was tracking the open and/or non-custodial wallets that were earlier used by DHI; however, DHI has moved the majority of its Bitcoins from these earlier public wallets into professional custody wallets and trading platforms.
This means that these Bitcoins are no longer visible to Arkham, and this is why several online crypto sites assumed the large movements to be sales, when that is not the case.
The same confusion is also there over mining because, since DHI is no longer using these old open wallets, the new Bitcoins being generated through mining are going to custodial wallets that are not being tracked, and so these online sites assumed Bhutan is not mining Bitcoins anymore.
In the earlier system, the wallets were more basic, as Bhutan retained the Bitcoin passwords or keys on hard drives etc., with the danger being that you could lose the coins if you ever lost the password or key.
To ensure a more secure system and also generate returns on its Bitcoins, Bhutan has started using the services of internationally licensed companies that manage crypto assets. These companies, for a fee, not only ensure the security of the assets but also help generate returns.
The returns are around 5 to 6% in BTC itself. Bhutan has the option of going for higher returns of even 15 to 20%, but these would be risky, and so Bhutan has opted for conservative and lower returns that are safer in nature.
The Bitcoins are under asset management in custody wallets.
In fact, DHI has not made any major sales in the last 12- to 18-month period. The only small sales have been to meet running costs like electricity bills, replacing some machines, etc.
Some machines are being replaced because the mining computers or machines have a lifespan of 3 to 5 years, and new machines are more efficient in terms of power usage and the generation of coins.
The latest machines use around 50% less power.
Around 15 to 20% of the machines have been replaced. Since the machines are from different companies and were installed at different times, they will also be replaced in stages.
Another issue has been the falling price of Bitcoin, with it currently at USD 61,895 as of Friday evening.
Here, a source said that the current production cost of Bitcoin in Bhutan is around USD 45,000 to 50,000, and anything above that is a profit.
The cost of production also depends on the difficulty rate of mining. A sharp drop in prices could mean fewer people mining, and this would produce more Bitcoins for less effort.
Bhutan is also playing the long game in Bitcoin, holding a lot of it in anticipation of its rise in the future but also making strategic sales at times.
Another concern is mining in the winter months, when power is imported at higher costs of Nu 4.5 to 5 per unit.
Here, a source said that at that time, the less efficient machines are shut down and the more efficient machines are used. So, if a machine is 50% more energy-efficient, then even the increased power cost can be absorbed.
DHI could go for more mines in the future, either by itself or in collaboration with international partners, but the main constraint is winter power capacity. Once this is improved with more projects in the coming years, then Bhutan’s mining capacity could improve.
DHI’s mining operations are being registered under the Gelephu Mindfulness City.
In the meantime, Bitdeer’s 500 MW mine in GMC and 100 MW mine in Gedu are running at full capacity.
Bitdeer has installed more advanced mining machines in Gelephu, which consume less power, and has been replacing machines in Gedu too.
The Bitdeer mine pays around 19% tax on its profits in USD and also land lease in USD. It also pays well above the power tariff rate paid by domestic industries.
