Paraguay Emerges Key Bitcoin Mining Hub In Latin America

Paraguay is quickly becoming one of the largest Bitcoin mining hubs in the region, thanks to its surplus of cheap hydropower. The Cambridge Bitcoin Electricity Consumption Index estimates that Paraguay housed 0.15% of Bitcoin’s hashrate in December 2021, but a bottom-up approach using Luxor business data and active miners in the country estimates that Paraguay has anywhere from 100-125 MW of Bitcoin mining. This would translate to 1.45% of total network hashrate on the high end and 1.16% on the low end, according to Hashrate Index’s Bitcoin Mining Energy Consumption Index.


Incentive for Bitcoin Miners in Paraguay

The Itaipu Dam, capable of generating 14 GW of power, is the biggest incentive for Bitcoin miners to move to Paraguay. Second only to China’s Three Gorges Dam, the Itaipu Dam provides power to Paraguay, Brazil, and Argentina. Paraguay draws over 99% of its power from this dam and its much smaller cousins, the Yacyretá and Acaray dams. However, Paraguay’s population of 6.7 million comes nowhere close to consuming all of the energy its dams produce, leaving it to export 90% of this production to neighboring countries Brazil, Bolivia, and Argentina.


ANDE Monopoly on Power Production

The Administración Nacional de Electricidad (ANDE) is Paraguay’s national grid operator and holds a monopoly on power production and distribution. The only exceptions to this monopoly are CLYFSA, a power company that can sell electricity in Villarrica, and the Empresas Distribuidoras Menonitas del Chaco Central. Since ANDE is the only entity allowed to commercialize energy in the country, most Paraguayan hosting contracts call for profit sharing. ANDE’s 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. A typical profit share in the country is anywhere from 15-20% depending on the miner’s deployment size.


Regulatory Hurdles

Despite the surplus of cheap hydropower, there are concerns that power tariffs and bureaucratic red tape could stunt the country’s hashrate growth. ANDE typically allots power in 6MW tranches per land leases, and the buyers of these PPAs typically must supply their own transformers. Prices for these PPAs vary widely, with a typical rate for a single 6 MW block of energy being $4.6/mWh, though there have been deals with much lower rates. Additionally, the regulatory mandates of the Paraguayan government could cause problems for the industry in the future.

As China’s mining ban shifted the axis of the Bitcoin mining industry from East to West, Latin America experienced a meteoric rise as a key mining hub. For Paraguay, it has quickly become a popular spot for miners, but the country will need to address its regulatory issues to fully capitalize on its potential as a Bitcoin mining hub.