Bitcoin mining is a highly energy-intensive process that requires a significant amount of electricity to validate transactions and create new coins. Therefore, miners are always looking for locations with cheap and reliable power sources. One of the most recent additions to the list of mining hotspots is Paraguay, a small country in Latin America with an abundance of cheap hydropower.
Paraguay’s emergence as a mining hub gained momentum after China announced a ban on Bitcoin mining in 2021, shifting the axis of mining from East to West. It is estimated that there is anywhere from 100-125 MW of Bitcoin mining in the country.
The primary reason for Bitcoin miners to flock to Paraguay is the Itaipu Dam, which is capable of generating 14 GW of power. Second only to China’s Three Gorges Dam, Itaipu is the beating heart of Paraguay’s power industry. The dam provides power to Paraguay, Brazil, and Argentina, while Brazil and Paraguay co-own the colossus. Paraguay draws over 99% of its power from Itaipu and its smaller cousins, the Yacyretá and Acaray dams. However, Paraguay’s population of 6.7 million consumes only a small fraction of the energy its dams produce, leaving it to export 90% of this production to neighboring countries Brazil, Bolivia, and Argentina at a significantly low rate.
The Administración Nacional de Electricidad (ANDE) is Paraguay’s national grid operator and holds a monopoly on power production and distribution. This monopoly disallows hosting facilities from making a spread on the power they sell to their mining customers. Instead, they take a slice of the miner’s profit, with a typical profit share in the country ranging from 15-20% depending on the miner’s deployment size. ANDE typically allots power in 6MW tranches per land leases, and the buyers of these PPAs must supply their own transformers.
It is worth noting that Santiago Peña Palacios, the current presidential candidate of the Colorado Party in Paraguay, is known to be crypto-friendly. As a result, miners are hoping that he will win the upcoming general election on April 30th 2023, as this could provide additional regulatory support for the industry.
Despite the benefits of cheap energy, there are concerns that power tariffs and red tape from Paraguayan bureaucracy may stunt the country’s hashrate growth. ANDE’s monopoly on power production and distribution, for instance, limits competition and may lead to higher electricity prices in the future. Additionally, the country’s climate, which is hot and humid, may pose challenges for miners seeking to operate in the region unless they consider cooling solutions such as hydrocooling or immersion.
Paraguay is quickly becoming one of Latin America’s leading Bitcoin mining hubs, thanks to its abundance of cheap hydropower. However, concerns over regulatory mandates and climate conditions may hinder the country’s hashrate growth. Nevertheless, Paraguay remains an attractive location for miners seeking to take advantage of cheap energy and a favorable regulatory environment. The upcoming general election and the popular vote for crypto-friendly candidates may also play a significant role in the future of Paraguay’s Bitcoin mining industry.
If you would like more information on how to get started mining in Paraguay from our experts on the ground, please contact us directly at firstname.lastname@example.org.