Paraguay’s hydro cities, long linked to gangs of traffickers, smugglers and drug scammers, are now home to miners who mine cryptocurrencies for their owners through complex network lines.
Cryptocurrencies generate meaningful industriesIn the eastern city of Paraguay, where patrols are guarding due to its proximity to the border with Brazil and Argentina, warehouses and open spaces near power centers are busy mining bitcoin and transmitting ethereum data centers. Most citizens are unaware that new industries have been created almost overnight, but industry insiders see it as a new economy, an opportunity to create value and meaningful jobs.
Environmentalists may not be so happy. The city's annual average temperature is around 22 degrees Celsius, but the presence of mining data centers means the city faces an increase in subtropical heat. An estimated 20,000 such mining units are present within the city limits, and activity does not appear to be slowing.
The reason for the boom is similar to Iceland and Mongolia emerging as central points for Bitcoin mining. Factors such as cold weather, favorable government regulations, low taxes and cheap labor have combined to create these new "Silicon Valleys."
However, for the city of the East - the large nearby Itaipu Dam form was an important factor in the creation of the mining center. The plant produces abundant hydropower, and it flows rapidly, year-round, to the city north of the Paraná River. And energy-intensive mining setups, which require powerful computing hardware and cooling systems, the energy supply is a boon.
One economist's best view of Paraguay's economic collapse is better use of Paraguay's water resources to lift a quarter of its population out of poverty. According to the World Bank, the country has the worst unemployment in the world and the highest inequality in land ownership.
Cryptocurrency means businessThe mining hub has sparked a flurry of related business. Gregorio Barreiro, a native of Paraguay, found hundreds of new clients for his air conditioning business when bitcoin mining began in 2017. He quickly took advantage of these connections and started producing manual cooling systems using industrial fans and wet cardboard. A year later, Barrero has leased more than 750 custom mining rigs with additional cooling systems, with 12 employees and mobile miners in development.
"Some people have become multi-millionaires, and Paraguay is the only place with abundant energy today. We can be the center of the global bitcoin mining industry," Barreiro said.
Paraguay has an abundant supply of electricity, but few factories and a faulty national grid, which means most of its electricity is sold to Brazil at below-market prices. Meanwhile, a domestic energy price of 5 cents per kilowatt-hour means Brazilian companies and investors are quickly opening up shop in the region, prompting a backlash from local workers looking for employment. Barreiro believes that China's 150,000 mining units could replace Paraguay's energy grid. He noted that for high-risk traders, cryptocurrencies are not just a volatile asset class, but a “way out†of a country’s economic crisis.
Barreiro suggested, "In 10 years, it will generate enough money to pay Paraguay's foreign debt. With our resources, we should have electric helicopters, drones to deliver goods. Our best chance is not to sell our energy to Brazil. , but invest in implicit investments.â€
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