Hashlabs initially operated its first Bitcoin mines in Kazakhstan. Today, the company mines in Norway, Finland, and Ethiopia. The founders talk about the strategies of these locations and where mining is headed in the future.
Hashlabs is a mining company that operates Bitcoin mines worldwide. Hashlabs sells ASICs and operates them on behalf of its customers. In this, Hashlabs is quite similar to Bitkern, which we recently introduced. However, it’s the small differences that will make the difference here.
The story of Hashlabs begins with Alen Makhmetov in Kazakhstan in 2021. China had just banned mining, and miners with machines for several gigawatt were looking for a new location. Nearby Kazakhstan presented itself as an option, and Alen seized the opportunity. Today, Hashlabs no longer operates a single mine in Kazakhstan.
An attractive location – at first glance
Alen Makhmetov. Image rights at Hashlabs, usage granted for this post.
Alen had previously worked for Glencore, the major commodity trader. In Beijing, he had organized the production of alloys in smelters. He quickly recognized the opportunity in mining. Smelting alloys requires a lot of electricity, so Alen already had the most important skill for mining: finding cheap electricity in large quantities and scaling production with it.
Kazakhstan, however, was only a good location at first glance. The country has a surplus of fossil energy that can be sourced cheaply, making it attractive. But the infrastructure, the power grids, were old. The grids became overloaded, Kazakhstan had to import electricity from Russia, prices rose, and the government increased taxes and regulated mining centers more closely to prevent overloads.
Any location advantage Kazakhstan had disappeared within a year, and miners started looking for a new home. At least one gigawatt of demand moved around the world – and Alen, now part of it, moved with them. In the process, he met Jaran Mellerud, a Norwegian, as well as Marek Sarafik, with whom he eventually founded Hashlabs.
To Africa and Northern Europe
Surprisingly, Alen’s mining found a new home in two of the most expensive countries in the world: Norway and Finland. Hashlabs also operates another farm in Ethiopia, and a mining center is currently being planned in an underdeveloped location: Indonesia.
Ethiopia, Alen says, is on the rise. There’s hardly a country miners talk about more when they meet. Since the country completed the massive Nile dam, it has an electricity surplus. „The government has realized that mining is a good consumer of power. That’s why they support the industry.“
If you plan to build a really big farm, Jaran adds, Ethiopia is a top location alongside the U.S. and Russia. 100 or 200 megawatts are possible, and Chinese miners are already building huge data centers. However, the country has a downside: „Ethiopia has a large government, one of the biggest in the world relative to its economy. It’s very centralized, with powerful institutions that regulate everything. This makes it very complicated.“
Expectations are similar for Indonesia. This country also has an energy surplus thanks to a dam, but it’s also centralized and strictly, sometimes arbitrarily, regulated. „You can make things happen, but you need to know the right people,“ says Alen. He hopes to establish large farms here, possibly with 100 or more megawatts.
Finally, Norway, where Hashlabs operates additional mines, is „the opposite of Kazakhstan,“ says Jaran: „The government is not directly pro-mining, but very stable, meaning it’s also difficult for them to harass the industry with arbitrary regulations.“ You know where you stand. It’s similar in Finland, but being part of the EU makes things a bit more complicated.
Why mining is most lucrative in Scandinavia
Jaran Mellerud. Image rights at Hashlabs, usage granted for this post.
In general, Hashlabs strives to make mining as harmless as possible. They primarily use hydro cooling instead of fan cooling. It’s much quieter, allowing the farms to be built closer to cities without disturbing residents, as recently seen in Hadsel, Norway.
Since hydro cooling is also more efficient, it’s better suited for mining in warmer countries like Indonesia. It also requires less space, 2-3 times less, which is useful in Finland and Norway, where land prices are high.
Additionally, Hashlabs now powers its mines exclusively with renewable energy. Both in Northern Europe and Ethiopia, this primarily means hydropower. In Finland, they are currently starting to sell waste heat to a city to reduce heating costs. „This has become part of our business model,“ Jaran explains. „Our fully automated farms in Scandinavia are globally the most competitive.“
However, mining scales differently in Scandinavia. Since there are only limited buyers for heat, huge mines like those at the Ethiopian Nile dam don’t make sense. Instead, smaller farms are more profitable, making mining in Scandinavia relatively small-scale and decentralized.
Locations with major disadvantages
As a miner, you need to try new locations if you don’t want to follow trends set by others. But this can also backfire. Alen and Jaran don’t speak from direct experience, but they’ve heard many stories from other miners.
„An interesting example was Angola,“ Alen says. „After the ban in China, many Chinese miners moved there. Electricity prices were cheap, and the government welcomed the revenue. But after just a few months, the miners overloaded the power grid, and the government imposed a ban.“
Hashlabs has also stayed away from the South American market so far. Regarding Paraguay, which has become a magnet for miners due to the large dam on the Brazilian border, Jaran is skeptical: „The country has had great potential for years, but it doesn’t seem to be realized. That makes me suspicious. The location must have a downside.“
For countries like Venezuela and Iran, the location disadvantage is more obvious: both offer cheap electricity but have arbitrary, partly despotic, and deeply corrupt governments. „In Venezuela, you have to make shady deals to gain access to the power system and often end up with criminal partners.“ Additionally, the power grid in Venezuela is quickly overloaded, which is why the government recently shut down mines.
The situation is similar in Iran: there is plenty of cheap, heavily subsidized electricity from coal and gas. But most miners made the mistake of building farms in parts of the grid where they shouldn’t have, leading to overloads there as well. „Ethiopia is doing it better. They scale up gradually and monitor if the power grid can handle the load,“ Alen says.
View from an Hashlabs farm in Norway. Image rights at Hashlabs, usage granted for this post.
Mining is becoming indispensable
In the years Jaran and Alen have mined Bitcoins with Hashlabs, a lot has changed. The farms have become more complex, and the technology more modern. They expect this trend to continue.
It’s already becoming clear that miners no longer see heat as waste but reuse it to heat towns and industries. This reduces heating costs, saving money for both residents and factories. Moreover, miners are increasingly integrating with the energy system, especially in Texas and now in Japan. The benefits of mining are slowly being recognized by the public.
„Mining needs to become indispensable,“ says Alen, „so that it can no longer be banned.“ This is already becoming apparent in Finland. „If Finland were to ban mining,“ Jaran muses, „heating costs would rise; more energy resources would need to be burned to create heat, and as a result, the prices of those resources, like gas, would rise, which would in turn hurt the industry. This has cascading effects.“