ViraMiner is an Iranian company that sets up Bitcoin mining farms and maintains them. It has two offices in western Tehran, located in separate adjacent buildings.
When Magazine visits, its old office is busy on a Monday afternoon. This place is now officially dedicated to its repairing services alone.
Mining devices are stored upon each other in yellow, green and red shelves raised against a wall facing the company secretary’s desk. Across the entrance, there is a busy repair room where devices are opened. Power supplies, hash boards and control boards are passed around, discussed and modified.
Bitmain Antminer and MicroBT Whatsminer are a specialty for repairs by the company, whose personnel are all young tech enthusiasts. Mina Jahanbakhshi, one of the three female employees present there, gives a tour around the office and leads me to a room next to the repair section, which is being prepared for new employees who have been hired to help the company keep up with its growing demand.
Electricity consumption peak in Iran’s hot summer has just passed and a presidential ban on power-intensive crypto mining has recently been lifted. The company, therefore, expects busy days ahead.
White new desks are put next to a wall toward the end of the quiet room and the extra repairing equipment has yet to arrive.
“The waiting period for repairing equipment is currently two weeks,” she says. “We are adding new personnel to speed up the repairing process.”
Mining has grown significantly in Iran over the past few years.
“People are getting more familiar with mining,” Jahanbakhshi says. “It’s an interesting and attractive field. It is growing worldwide, and likewise in Iran.”ViraMiner is an Iranian company. (Supplied)
As another sign of a growing business, the company is preparing an additional office in a separate building nearby. The air in the under-construction workplace is teeming the odor of fresh paint.
Omid Alavi, ViraMiner’s CEO, is having a meeting a few steps from construction workers doing plasterwork on the walls.
There is no place to have an interview, so we move to the neighboring apartment where an office for another company is being prepared. Alavi exchanges a few jokes with the people in the neighboring office. A person unfamiliar with their relationship would assume the two offices belong to the same company.
“These are our competitors,” Alavi says jokingly as we walk past a desk across the entrance. “The crypto community is really small.”
Alavi tells Magazine that he established the company with two other partners back in 2016.
“In 2017-2018, the Bitcoin hype gained momentum. Many got interested in cryptocurrency and this led to the building of many mining farms in Iran. We put our focus on the setting up and the maintenance of the farms. We generally became a specialized company in this sector.”
Despite ups and downs, ViraMiner has seen overall growth in recent years.
“In the past four to five years, the number of our personnel has increased to nearly 70. We created a specialized repair services unit, where 16-17 trained personnel repair mining equipment,” he says.
“We had some of our staff do courses in China’s Bitmain Technologies Ltd and MicroBT. We also invited experts from China to train our staff here.”
ViraMiner was initially established as an underground company. But, in 2019, when mining was recognized by the authorities as an industry, Alavi and his colleagues received permits to be an authorized company active in the field.
“Simultaneously, we have tried to help the government make regulations for mining,” he says.
According to the Iranian Mining Association, two-thirds of Iran’s Bitcoin mining is unauthorized.Bitcoin mining is big business in Iran.
Iran accounts for an estimated 4.5% to 7% of the global Bitcoin hash rate. The extensive reach of the industry has prompted the Iranian government to increase its supervision of mining.
However, the government has concerns with the industry due to the sector’s consumption of Iran’s heavily subsidized electricity, as well as a sneaking suspicion that illegal miners are evading taxes and duties.
Moreover, the government has shown a desire to turn mining into an opportunity to compensate, at least in part, for an almost-complete embargo on its banking and oil industries due to international sanctions.
Blockchain analytics firm Elliptic said in May that Iran’s Bitcoin production had hit revenues close to $1 billion a year at the country’s then-level of mining.
The former head of the Central Bank of Iran (CBI) Abdonasser Hemmati said in March that authorized farms will need to deposit their mined Bitcoin on exchanges specified by the CBI. Importers can then use Bitcoin as a source of foreign currency to pay for the goods purchased from overseas sellers.
But, despite many efforts to make laws efficient and clear, the regulations have still failed to satisfy mining businesses.
Miners complain that the government’s tariff scheme — paying the export price for electricity — is unreasonable and that it makes mining less attractive in Iran.
Regulations, especially those proposed by the CBI, are unclear and not yet operational, miners say.
“So far, the government hasn’t created operational infrastructures for this,” says Alavi.
“The government legislation puts forth two options for Bitcoin miners. They say either you can import products under the supervision of the Central Bank and be exempt from taxes or if you want to keep your Bitcoin, you need to pay your taxes — even though tax instructions for mining are unclear, too.”
Javad, a Tehran-based mining expert, tells Magazine he believes that clear regulations are crucial for the growth of the mining industry in Iran. He requests anonymity due to security concerns in Iran over speaking to foreign media, but he’s a hardware engineer with five years of experience in Iran’s mining industry.
“Mining is very attractive in terms of its revenue in countries like Iran, where income per capita is relatively low and there is a struggle with a high inflation rate,” he says,
“The role of regulations is utterly important to assure the robustness of the industry and to keep it from slipping into the shadows. If we have regulations that are a win-win for both the government and the businesses, miners would definitely be willing to come out of the shadows. Though, at the moment, the Energy Ministry has a one-sided view of this issue.”
He hopes that the government would recognize the potential in the sector for creating jobs and prosperity in Iran’s ailing economy.
“Bitcoin mining could be used by Iran to evade sanctions. But, if we decide to use this potential, we need to accept it completely. It means that Iran should have the required regulations to create domestic mining pools in case international pools decide to block Iranian miners,” he says.
“If Iran wants to use transactions on Bitcoin’s network in favor of its national interest, it needs to pay special attention to mining and make certain local rearrangements.”Part of the Tehran city skyline
Despite the government’s newly found use for domestically mined Bitcoin, Iran’s poor power infrastructures have forced it to seasonally unplug farms that are on its watch.
In late May, authorities banned crypto mining for nearly four months as the country faced major power cuts in many cities.
This led to a drop in revenue for many mining businesses, including that of ViraMiner.
“We went into seasonal hibernating for four months,” Alavi says laughing. “We didn’t have much revenue through unauthorized miners either because the government was putting so much pressure on them and they were mostly scared off.”
So far, Iranian authorities have seized 221,390 mining devices according to Iran’s State News Agency IRNA, citing the state-owned Iran Grid Management Company.
The report said that the seized miners would have consumed 624.7 megawatts of electricity.
The Energy Ministry says Iran’s electricity consumption can hit a peak of 66 gigawatts in the summer. This is much higher than the country’s 55-gigawatts power generation capacity.
Meanwhile, according to Iran’s Blockchain Association, the overall mining consumption could be less than 1 gigawatt. This includes more than 600 megawatts consumed by unauthorized mining alongside more than 300 megawatts related to authorized farms.
“Mining accounts for less than 10% of electricity issues and power cuts in Iran,” Javad explains.
“The Energy Ministry has not been able to increase the number of its power plants. This should have taken place as part of a plan to raise power generation capacity to keep pace with annual growth both in domestic and industrial electricity consumption.”
He says that the mining industry has become a scapegoat for poor power infrastructures, as well as mismanagement on the part of the government.
“Many private power plants have not been able to undertake maintenance and overhaul operations on their worn-out facilities. This is because their payments have been long overdue,” he says, referring to payments due from the state. “So, they are not able to operate at full capacity.”
While authorities have focused on big farms operating at industrial and agricultural facilities, small-scale mining has had much of a chance to evade the government’s radars.
Home miners, in particular, are more difficult to trace.Electricity consumption is a big issue in Iran.
Many Iranians have tried, in recent years, to set up one or two mining devices at home to be able to earn extra income at a time of economic hardship and high unemployment.
In 2019, home mining accounted for 2% of total unauthorized mining in Iran, according to Iran’s Moj News Agency. The number rose to 6% and 12% in 2020 and 2021, respectively.
“I used my miner for nearly six months at home,” Hoda, a Tehran-based miner, tells Magazine.
The 28-year-old art graduate makes handmade ceramics and pottery for a living.
“I don’t think the government can trace one or two miners set up at home,” she says. “I’ve been able to mine 0.1 Bitcoin and I’m planning to continue.”
Mostafa, who has been mining Bitcoin at his apartment in Tehran, says: “It is profitable, indeed, because both the value of the equipment and the price of Bitcoin go up over time.”
“But, it is difficult to do this at home because of the noise and the heat that it gives off. It could really become annoying.”
Both interviewees wanted their last names undisclosed due to concerns over the illegal nature of mining in Iran.
Mostafa says that the government would finally need to accept crypto mining and trading as legal businesses.
“No matter how much you confront technology, you’ll lose anyway. The government has to come to terms with crypto. It helps create revenue. Many countries are compensating for some part of their economic difficulties with crypto,” he says.
Despite profiting from crypto mining and having sold his mined Bitcoin on Iranian online exchanges, Mostafa expresses concern over lax operations of exchanges in Iran.
“One of the exchanges shut down its business a while ago. They stole people’s money. I don’t know where its office was,” he says.
“You can’t really trust these exchanges. If you go to their website, few of them have an address or a telephone number.”
The number of Iranian online exchanges has risen significantly alongside the growing number of Iranians investing in cryptocurrencies.
A study published in May said that nearly 12 million Iranians, out of a population of 85 million, had invested in crypto. It said 62% of the investors entered six months prior to the study when cryptocurrencies were seeing an increase in value.
Mohsen, an Iranian trading expert, emphasizes the role of the pandemic and the shutting down of many small businesses as reasons for public attention toward investment in cryptocurrencies.
“Crypto has been the most accessible market for Iranians as sanctions restrict their access to other international financial markets,” he says.
“Many enter the crypto market during a bull run and get a Wolf of Wall Street kind of impression. But, I think people would not have a good memory of crypto in the end, as they are mostly unaware of the technicalities of trading.”
He expresses doubts about the possibility of the government creating effective regulations for trading.
“Crypto could be a stepping stone for Iran’s economy. But, this opportunity will eventually go to waste because our regulating system is flawed,” he says.
My interview with Alavi, ViraMiner’s CEO, becomes interrupted when he receives a phone call.
The office is now quieter. It takes only a minute before he hangs up, complaining half-jokingly about the conversation that he had on the phone.
“In the mining industry, nothing goes based on a plan. Seriously. In the past four to five years, I haven’t done one single project that was orderly, routine and standard,” he says.
“The mining sector is always in a rush. The investor wants its rigs immediately turned on and they want the farm to start operating as soon as possible. This is because network difficulty might suddenly see an extreme surge and this could cause a drop in revenue. Your business plan is volatile.”
Much capital has, so far, been brought to the mining industry by investors in and outside Iran.
Iran’s largest farms are run through Chinese investment. They are set up in Free Economic Zones, where companies are offered exemption from taxes and duties.
The biggest farm in Iran, established by Iran and China Investment Development Group, is based in a free zone in the southern Kerman Province. It is a 200-megawatts farm with a 2,000,000 terahash data center and 70,000 ASIC miners, according to the firm’s website.
A 30-40-megawatts farm set up by the Chinese in Maku FEZ in Iran’s northwestern region comes next, followed by smaller 4 to 5-megawatts farms, according to Alavi.
He estimates that $180 million to $220 million has been invested in authorized mining in Iran, though the potential for investment is much higher if obstacles on the government’s end are removed.
“Regulations related to the price of power have a few flaws. One of them is that the government set the export price as the price of electricity for mining, which we think is high. The other is the correlation between the price of power and the US dollar to rial rate. The government said in its instructions that, if rial’s value against the US dollar fluctuates more than 10%, the price of power will change too,” he says.
“This causes investors to feel uneasy. Due to a continuous increase in the value of the dollar against rial, the price of power has kept rising. It’s not a stable factor to include in your calculations as an investor. So, big investors never touch this sector.”
Even Bitcoin’s increasing value could fail in shielding investors from losing profit. Any profit can be cut by a hike in the price of exported electricity due to a decline in the value of the rial.
“Whenever crypto prices increase, rial loses value, resulting in a rise in the cost of power. The price of electricity has risen since the beginning of this year. Previously we would give $0.04-0.05 per kilowatt, which has reached $0.07-0.08. This spooks investors,” he says.
Despite dissatisfaction about the circumstances that authorized mining is currently struggling with, Alavi says he is optimistic about mining’s future in Iran.
“I don’t think Iran will be able to afford the costs of crypto assets going underground. So, it will create proper regulations for them,” he says.