Troubling Future of Geopolitics and Bitcoin Mining

• Bitcoin mining dominance is a “national security concern,” according to experts.
• Russia claims to be the second-biggest Bitcoin mining entity in the world, next to the U.S.
• Donald Trump has promised to make the U.S. the world center of Bitcoin mining.

As the world’s superpowers vie for a huge share of the Bitcoin (BTC) mining sector, the decentralized network could soon become weaponized.

Now, it appears Russia is positioning itself to grab a seat on the Bitcoin train.

Bitcoin, a Strategic Necessity

Speaking at the Alternative Investment Management (AIM) Summit 2024, Fred Thiel, CEO of MARA, formerly Marathon Digital, argued that Bitcoin is a geopolitical force.

According to Thiel, we should all pay close attention to how nations could seek to project power by gaining a dominant spot in Bitcoin mining.

Mining is much more than just producing new BTC tokens; it’s the means through which transactions are processed on Bitcoin.

No mining, no blockchain, no transactions.

As Thiel points out, miners are competing for a share of the hashing power used to process new blocks, but there’s a limited number of blocks per day, 144 to be exact:

“Now imagine you’re on a train and there’s only 144 seats on that train and you have to process transactions because you as a country need to settle a large deficit payment. Or you have to settle international trade. What happens when you can’t get a seat on that train?”

Thiel notes that even though you may own Bitcoin, without a seat, you are “effectively locked out of the market” if you keep missing that train. Therefore, owning block space “becomes a strategic necessity.”

A National Security Concern

With Donald Trump soon to take office as the next U.S. President, talks of a Bitcoin strategic reserve are being floated around Washington. But what good is a significant stash of BTC if a rival state controls the network?

Thiel has previously described the need for the U.S. to play a dominant role in Bitcoin mining as a “national security security concern.” This view is echoed by many.

The recent actions taken by Russia offer credibility to Thiel’s claim. Russia has begun implementing all the regulatory frameworks to legitimize Bitcoin mining in the nation.

Naturally, it’s presumed this is part of its broader aims to skirt political and economic sanctions imposed on it for its invasion of Ukraine.

Its move to establish an alternative financial system, or at least economic infrastructure, aligns with the broader visions of the emerging BRICS group.

Most recently, it was announced that Russia plans to expand its mining influence and build Bitcoin mining infrastructure and facilities in BRICS nations.

Russia has claimed that its crypto mining industry comes second only to the U.S., though this remains unconfirmed as recent data shows it also ranks below China, Kazakhstan, and Canada.

Bitcoin Control

A few years ago, the U.S. Office of Foreign Assets Control (OFAC) requested miners block transactions that originated from sanctioned entities. This is quite a lofty request as Bitcoin can be easily moved, and its origins easily obscured.

Imagine if a nation’s government had enough control over the Bitcoin network to effectively block and halt transactions from their economic and political enemies. This is entirely plausible.

Then, it becomes a back-and-forth of countries coming under sanctions, relying on Bitcoin to skirt them, and retaliating by leveraging their nationwide mining infrastructure to impose their sanctions via Bitcoin.

That would give a dominant mining entity a means to project economic power with far-reaching consequences for users, industries, and any national government hoping to leverage Bitcoin as a strategic reserve asset.