Stories continue to emerge about newly discovered illegal mining operations being busted by state and corporate authorities. Just last week Iranian media reported the seizure of 177 Bitcoin mining units worth over $270,000 being smuggled via truck in the Arak region. On July 31, Russia’s Kraskom power company reported illegal siphoning of power from municipal grids for mining, resulting in losses over $31,000. With incidents like this in no short supply, it is worth asking why people are willing to risk severe criminal punishment to mine crypto, and whether government monetary policy worldwide might play a role in creating such demand.
Violent Legislation Doesn’t Work
As American economist Milton Friedman once so aptly observed, “Prohibition is an attempted cure that makes matters worse – for both the addict and the rest of us.” In the case of the historic U.S. prohibition on alcohol, it proves to be so. From the government literally poisoning people to death to stop alcohol consumption, to the proliferation of thousands of underground bars and speakeasies dealing with mob crime syndicates, the whole debacle was an abject failure, much like the so-called drug war of today. Prohibitionism always serves two roles: to distort the organic price and demand for the activity or substance, and also — by virtue of violence-backed laws and the violent markets they engender — to make it more dangerous.
Bitcoin mining restrictions can be viewed similarly in some respects. In light of current prohibitionary, fiat strangleholds on economies worldwide, crypto mining has become very lucrative. Thanks to the sound nature of Bitcoin and its limited supply, it would be lucrative regardless, but with prohibition added to the mix, markets are sharply and artificially dynamized. Whether it is the illegality (in some countries), or the systematic devaluation of fiat…