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Academic Says Bukele’s Bitcoin Mining Test Is ‘Bad Business’

Adoption

Bitcoin El Salvador Latin America

Mining

Last updated: October 23, 2023 09:32 EDT

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Tim Alper

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Tim Alper

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Tim Alper is a British journalist and features writer who has worked at Cryptonews.com since 2018. He has written for media outlets such as the BBC, the Guardian, and Chosun Ilbo. He has also worked...

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Last updated:

October 23, 2023 09:32 EDT

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A leading Salvadoran engineering academic has claimed that volcano-powered Bitcoin (BTC) mining could be ruinous for the nation’s economy, and says that the government has spent USD 4,672 worth of public funds to mine just USD 269 in BTC.

Per El Diario de Hoy, Carlos Martínez, a professor of Electrical Engineering at the University of El Salvador (UES), claimed that in four days of mining so far, the state has managed to mine a total of BTC 0.00599179 (USD 269 at the time). The professor added that if the price of energy were USD 0.13 per kilowatt-hour, and the government was using 100 miner 3.74kW WhatsMiner M31S mining rigs, the state was paying USD 1,168 in costs. “That’s definitely bad business,” Martínez concluded.

The professor made his calculations based on data released by the government on Friday.

However, President Nayib Bukele added a caveat to the figures, stating that the government was “still testing and installing” its new system.

We’re still testing and installing, but this is officially the first #Bitcoin mining from the #volcanode 🌋
— Nayib Bukele (@nayibbukele) October 1, 2021

Bukele stated that “we are still testing and installing, but this is officially the first Bitcoin mining” of volcano energy.

Other skeptics continue to express doubts. The same media outlet reported that energy industry insiders “agree that the current facilities at LaGeo (the state-owned geothermal generation company) do not have the capacity to house a Bitcoin mining center,” claiming that BTC mining demands more energy than the firm can produce at the “volcanode.”

Martínez agreed that the nation “does not have the installed capacity to meet the demand for electricity,” and warned that if sufficient energy were allocated to a mining center, “that would raise electricity tariffs for ordinary Salvadorans.”

The media outlet, which is opposed to Bukele’s rule and his BTC adoption policies, noted that the President has not yet “detailed the cost of the equipment acquired for the mining project.” Nor, it noted, has it revealed exactly how much energy is being used at the site, how much the facilities cost to construct or the number of government employees involved in the mining project.

Last week, a prominent NGO, the Foundation for Economic and Social Development (Fusades), stated that mining Bitcoin at scale in El Salvador would “cause shortages and increases in the price of energy.”

Álvaro Trigueros, the director of the Fusades Department of Economic Studies, was quoted as stating that mining at the “volcanode” would likely be limited and could not hope to grow to a “large scale,” as the government was all too aware that intense mining efforts would “generate problems in the national electricity market.”

Regardless, on Reddit, many international posters reacted with relative enthusiasm, with one writing that they hoped this was “just growing pains as they ramp up mining and gets some scale.”

Another wrote that the report was “just clickbait,” as it “takes time to build the hash rate and smooth things out.”

Bukele, meanwhile, has been triumphantly proclaiming the success of the state-issued Chivo app, which he wrote now has 3 million users – in a country of almost 6.5 million people.