The seemingly less dramatic but strategically critical issue of Kazakhstan’s energy crisis is raising “energy tourism” for high-tech firms and the risk of cryptocurrencies. Analysis by Andrea Monti, Lecturer in Digital Law at Chieti Pescara University
A side effect of the Kazakhstan crisis has affected the mining industry based on energy-intensive data centers that dedicate enormous power to the search for cryptocurrencies. The complexity of the mathematics of cryptocurrencies and the need to perform a large number of calculations ensures the rarity and safety of these operations. The price that must be paid to find a bitcoin (or something similar), is represented, first of all, by the energy cost of performing these operations. It is therefore not surprising that countries such as Kazakhstan have adopted pragmatic policies that attract mining companies.
Energy policy as an attractive factor for high-tech companies
In short, this strategy is the classic win-win example: excess energy allows it to be supplied at competitive prices, mining companies multiply, their profits increase, and the state collects more tax revenue. In fact, however, what is happening in Kazakhstan shows that ignoring the basics of economic geopolitics by favoring the nomadic tactics of the platform industry can have very serious consequences.
In contrast to a production system that relies on factories that cannot be moved easily, devoid of obvious complexities, a system that relies on platforms – and therefore software – is more easily managed because the value lies in the intangible component. In other words, a data center is inherently “neutral” with respect to the software that is running it. This allows companies greater mobility to the places and countries that offer the best conditions at a given economic historical moment. As the events of these days show, neglect or lack of concern about general geopolitics can lead to consequences that are difficult to manage.
Energy, Cryptocurrency, and Technology Sovereignty
Similar to fiat money, cryptocurrencies have value only and exclusively because someone recognizes them. Unlike fiat money, the existence of cryptocurrencies depends on the technological infrastructure that allows them to be searched, exchanged and stored. In other words, it means entrusting those who control networks, data centers, and software platforms with the tangible power to decide on the wealth of individuals and nations. But it also means relying on who controls the power needed to make the entire system work.
The cryptocurrency profile is primarily related to speculative financial activity, so if the sector were to collapse due to sudden contractions in energy availability, we would simply be faced with the massive bursting of a high-tech bubble like the one already seen in the past years.
However, the Kazakh crisis highlights more scenarios that need to be considered regarding the intersection of national security, energy and information technology.
The emergence of energy-based and electricity-based neocolonialism is able to adapt the strategic development of AI applications. Training models for machine learning platforms also require huge amounts of power. It is no coincidence that the main suppliers of “machine time” for model training are Microsoft, Google and Amazon, that is, companies with huge data centers around the world.
Thus, similar to what happens to cryptocurrencies, countries that are able to contain energy costs (because they have a surplus or have economic support policies) only gain an insurmountable advantage over others, such as Italy, which from this point of view is out of competition. However, while blockchain and cryptocurrency are technologies of dubious utility that can be done without them, the same cannot be said of machine learning.
The absence of information technologies in Italian energy policy
The implications for each country’s technological sovereignty are clear and need no further elaboration.
The Italian option to speed up the digitization of public services should, we hope, consider long-term perspectives to avoid problems such as the one that adapted data centers to produce cryptocurrency in Kazakhstan. However, there is evidence that this did not happen.
The short-term response to the current energy crisis relies mainly on trying to contain costs, but long-term policy options remain elusive.
Moreover, the public debate on this issue has once again polarized on the nuclear issue. It proposes on both sides positions that are incompatible with contemporary needs and the current geopolitical scenario. It does not take into account the energy needs of applied research in the leading sectors of information technologies, on which the ability of the state to claim a leading role in international scenarios depends. Hence it introduces a structural gridlock in the ability to compete with countries that, unlike Kazakhstan, are also using energy policy to fight technological “soft war” in these times.