Key Points
- Bhutan, one of two nations confirmed to be mining Bitcoin, is leveraging its hydroelectric power production infrastructure for Bitcoin mining.
- Bhutan’s Bitcoin holdings and mining infrastructure are gaining relevance with the devaluation of fiat currencies worldwide.
Bhutan, a South Asian nation located on the eastern edge of the Himalayas, alongside El Salvador, is one of the two confirmed countries currently mining Bitcoin (BTC).
The country decided to capitalize on its large water reserves and its hydroelectric power production infrastructure. This decision was driven by the country’s shift in attitude, which has made Bhutan a natural place for hydroelectric power.
Hydroelectric Power and Bitcoin Mining
With an abundance of electricity, much of which is exported to energy-deficient India, Bhutan has begun to construct Bitcoin mines. The aim is to ensure the nation’s economic self-reliance and socio-economic development.
By using its hydropower infrastructure to mine Bitcoin, Bhutan is ensuring its own self-reliance and socio-economic development. Furthermore, Bhutan could become the first nation on Earth to adopt a Bitcoin standard.
Bhutan and Bitcoin
According to Arkham Intelligence, Bhutan currently holds over 13,000 BTC. This makes Bhutan the fourth-largest government holder of Bitcoin in the world, behind the US, China, and the UK, all of which confiscated their BTC through law enforcement actions. Bhutan is ahead of El Salvador in terms of holdings.
With a population of one million people, Bhutan’s Bitcoin holdings equate to approximately 0.122 BTC per person, or nearly $8,000. As Bhutan’s Bitcoin holdings and mining infrastructure gain more domestic and geopolitical relevance, Bhutan is positioning itself to innovate in the realm of monetary policy and Bitcoin.
On a Bitcoin standard, Bhutan could keep its monetary unit, the Ngultrum. This would be akin to countries pegging their own individual national currencies to gold under the gold standard of the nineteenth and early twentieth century, while keeping their own currencies.
Bhutan’s currency would circulate alongside Bitcoin, while being simultaneously pegged to Bitcoin. In other words, the notes would be redeemable for BTC. The currency would remain fiduciary, as it is not fully backed by Bitcoin.
Under a Bitcoin standard, Bhutan would not be able to conduct an interest rate policy to change domestic economic conditions without depegging from Bitcoin.
Bhutan didn’t have electricity until 1966. Despite being ranked 133rd in terms of land area and 160th in population today, Bhutan is proving itself a 21st-century leader.
The nation’s investment in hydropower has already fueled economic growth. Bhutan’s decision to exploit its water resources for the production of electricity, and to use some of this electricity to mine Bitcoin, could drastically alter the economic outlook of the landlocked country.
By backing the Ngultrum with Bitcoin, Bhutan could shock the world by adopting a Bitcoin standard, similar to the Classical Gold Standard. Bhutan could set the Bitcoin standard “rules of the game” that other countries will follow as they too adopt a better way of life than central bank fiat currencies.
If Bhutan adopts a Bitcoin standard, it could potentially act as a lender of last resort for countries and institutions facing acute crises. Under a Bitcoin standard, Bhutan might expect “mild deflation, low nominal interest rates, and good output growth under the Bitcoin standard.”
The article was written by Kadan Stadelmann, a blockchain developer, operations security expert, and Komodo Platform’s chief technology officer. His experience includes working in operations security in the government sector, launching technology startups, application development, and cryptography. Kadan started his journey into blockchain technology in 2011 and joined the Komodo team in 2016.