Crypto mining is the process of releasing cryptocurrencies into a network by completing a given set of mathematical computations. And just like any other mining industry — gold, data, etc.– it comes with a unique set of challenges.
There has been an uptick in cryptocurrency mining in India in recent years. Companies such as Easyfi Network provide mining facilities and blockchain development in the country. Shetty of WazirX believes that there could be some other pockets of small-scale mining operations in some parts of the country. However, there is no official information available on the same.
Those in the ecosystem believe that supporting crypto-mining could give the country many benefits. “When you allow these (mining) operations, there are two things that can come with it — one is investment and the other is employment. And there is an economic activity that generates around that. So India could take advantage if it wanted,” Shetty said.
But like most things related to cryptocurrencies in India, mining in the country can be risky.
India does not have any clear rules for cryptocurrencies, which makes any investment into the space risky. The Indian government and central bank have so far had a love-hate relationship with cryptocurrencies.
Since mining bitcoin is an energy-intensive process, setting up blockchain pools in India may be tedious and expensive. In India, the annual cost of electricity ranges between Rs5.20-8.20 (7-11 cents) per kilowatt-hour on average, as compared with Kazakhstan, where it costs 4-5 cents/kWh.
Cryptocurrency mining consumes about 67.29 terawatt hours a year, according to an estimate by the Cambridge Bitcoin Electricity Consumption Index. On May 10, the global consumption of electricity for bitcoin mining peaked at 141.28 terawatt-hours for the first time ever.
“Mining may not be profitable in India because of the electricity costs,” Shetty of WazirX said. “If you get into renewable sources of energy like solar panels, it may be cost-effective.”
Shetty believes that incentivising miners in form of subsidies can be one way to develop a cryptocurrency ecosystem in India.