I'm from Venezuela, and happen to know a few people that are mining bitcoin down there. Electricity is incredibly cheap! You practically don't have to factor electricity costs in your operation. Yes, the grid is very unstable, but you can always by generators that run on gasoline (which is also incredibly cheap! a full tank of gas for your car will cost less than 0.1 USD.)

Now, this is obviously horrible for the environment. But what can you expect when your own currency is being rapidly destroyed by the power-hungry idiots that have taken hold of the country. Let's hope for a brighter future.

Can you shed a light on how is the situation there? The media made it seem like nobody is surviving right over there. I hope you are safe.

I have actually been living in Canada for 4 years now. Everything is a very hairy mess; I was there in the summer of 2015 and remember thinking "Wow! Things can't get possibly worst than this", and then I went back unexpectedly late this year and I can't tell you how much worst things are looking.

The infrastructure is collapsing, finding food to eat is a game of going to every supermarket in the city, among other things. I think my Dad puts it really well when he says that Venezuela has had a reversal of all the progress we made for decades; people have lost a lot of their values simply because life is so tough.

> I'm from Venezuela, and happen to know a few people that are mining bitcoin down there

Is there any evidence government cronies are mining Bitcoin en masse?

> Is there any evidence government cronies are mining Bitcoin en masse?

I'm not quite sure why people who have contacts in the government would need/want to run bitcoin.

If you do have reliable contacts, the best way to make money (as I understand it) is from import/export fraud, as well as exchange rate trickery.

Bitcoin seems like it's something you can do without government contacts.

The main point is that you need to be holding a currency that isn't the bolivar, because the year-over-year inflation rate is something like EIGHT HUNDRED PERCENT as of Dec 2016.

USD, Bitcoin, commodities, food ... anything has better return than that.

800% is soooooo 2016. The International Monetary Fund is planning 1600% for 2017. http://www.forbes.com/sites/timworstall/2016/07/19/congratul...

Yeah. I think the point I was addressing is that if you had government contacts, you wouldn't need bitcoin.

You'd be squeezing your contacts for hard currency, which is simultaneously more lucrative and easier than mining bitcoin. Bitcoin is for people who are locked out of official exchange rates.

I suspect electricity is pegged to the official rate. This makes it heavily subsidized even if it isn't. (The spread between the official and black market rate is huge)

So basically they are buying electricity at official rate and then selling the proceeds in the black market. Rinse and repeat. I suspect, also, their biggest challenge is to get the miners inside the country (since they are usually huge in size)

> Is the electricity subsidized enough to justify all the other headaches associates with running an operation out of there?

Yes, it is. Mining cost is overwhelmingly dictated by energy cost. And once you have a small farm running, it should be easy to scale up.

Also consider the possibility that they were stealing the power (I think I read that somewhere).

You also have to constantly update your mining equipment, because it becomes obsolete within months.

Isn't the main reason that they become 'obsolete' is because their cost to run (pretty much just electricity and per unit cost of the miners themselves) exceeds the expected pay out (their relative hash rate). So by running where electricity is much cheaper older machines that have been discarded can still make sense to run.

Really depends. CPU mining is like trying to mine a diamond with a toothpick and will only get worse. If your machine isn't above at least some threshold (unless you have a massive farm of them), you're really just wasting CPU cycles and heat.

Yeah it doesn't magically make _any_ mining technique profitable again but it does shift the math back towards slower/less efficient ASICs being viable to use instead of just being a waste of money. From the article it sounds like they're using 300 of the Antminer so they're not trying to run CPU or GPU mining not sure where it falls on the current profitability range, I'm not that deep into BTC.

Months is probably inaccurate mainly because new equipment is not released that often. You may need more equipment to maintain your share but not necessarily updated equipment. Further updated equipment usually helps alleviate the energy usage which in these cases is not as relevant.

The miners I've known don't usually throw everything out. They expand or maintain with new gear when appropriate, and 'expire' the oldest stuff when space gets tight.

You're right about the electricity point - replacement schedules are often dictated by power per watt, since improving that expands margins. If power is free or subsidized, hardware costs are a larger part of expenses and it becomes tempting to buy more older gear instead of less fancy stuff.

(As an aside, miners are a great place to buy computer parts for that reason - I've known several unloading last year's GPUs dirt cheap. The hardware is run into the ground, but I've seen "if it craps out call me and I'll replace it" deals.)

I cant imagine many people are still mining on GPUs, not since ASICs have become the norm and unfortunately a bitcoin mining ASIC is pretty useless outside of mining for bitcoins.

>With the instability of their currency I can understand why someone would want to use or buy bitcoin, but why mine there?

I suspect you answered your own question.

>the electricity subsidized enough to justify all the other headaches associates with running an operation out of there

People tend to behave rationally so based on the other prospects, which there aren't many of in Venezuela, Bitcoin mining must have become a useful source of income.

Bitcoin mining is actually a pretty fantastic option - it enables buying subsidized power very cheap, and then generating wealth that's very easy to convert to hard foreign currencies. So it's cheaper to do there than in the US, and more rewarding once you do it.

From https://en.wikipedia.org/wiki/Electricity_pricing

> 3.1[US cents/kWh] at Official exchange rate ( 13.50 Bs/US$) or 0.48 [US cents/kWh] at unofficial exchange rate (1.095 Bs/US$)

(This may have changed due to high inflation.)

For comparison, in the same table the price in continental USA is between 8 and 17 [US cents/kWh].

They were exchanging it for money or stuff in Colombia, so they were getting an effective price similar to using the black market bolivar/US$ exchange rate, i.e. 0.48 [US cents/kWh]

I updated Wikipedia. I live in Caracas and just had a look at my invoice.

Electricity is practically free, and I imagine they didn't move there to mine but rather were born in Venezuela.