The Kazakhstan Bitcoin Project

Sourcing a location and securing an electricity supply for a new Bitcoin mining project in Kazakhstan.

Abdumalik Mirakhmedov wanted to start a Bitcoin mining project. In 2016, he approached the founders of the global crypto mining conglomerate, Marco Streng and Marco Krohn of Genesis Mining Limited, with a proposal to create a joint venture in Kazakhstan. He also brought his Kazakh business partners Rashit Makhat and Andrey Kim (all three collectively known as MMK) into the project.

In the first quarter of 2017, MMK and Genesis Mining Limited entered into a 50/50 partnership in a new Kazakhstan bitcoin project - the joint venture Genesis Mining (GM JV). MMK was responsible for finding a site for the project, as well as finding a source of electricity of up to 100 MW, the price of which does not exceed 4 cents per kW for mining farms, and Genesis Mining provided the Bitcoin mining technology and equipment.

Kazakhstan, with its climate and cheap electricity, seemed like an ideal place to implement the project. The missing element for MMK was to find an energy source with a capacity of up to 100 MW, purchase it at a competitive price and prepare a location for the mining farm. According to the agreement, Genesis Mining was ready to supply the necessary equipment within the agreed time frame.

MMK's obligatory condition under the agreement with Genesis Mining was to ensure uninterrupted power supply at the test site they had already chosen in the city of Astana (which belonged to one of MMK). There, together with Genesis Mining, in the first quarter of 2017, they already launched an experimental crypto-farm with a capacity of 1 MW, for which they were forced to purchase electricity at 5 (!) cents per kW, having equipped one of the existing workshops for this. And in place of other free areas, they planned to further increase the farm's capacity to 100 MW.

However, MMK was unable to provide electricity supply. Thus, the successful continuation of the project was in jeopardy and MMK was forced to turn to third parties for help.

In May 2017, MMK turned to Yermek Alimov, who has extensive experience in the energy sector of Kazakhstan, and asked him to intervene to save the project, to which he agreed. Alimov played a decisive role in the launch of the GM JV mining project, redirecting his experience and assets to support MMK's obligations to Genesis Mining.

Realizing that placing a crypto-farm in Astana could cause damage to the population and business of the capital, despite the insistence of MMK, Alimov proposed directing efforts to place breaded crypto-farms in energy-rich regions (for example, Pavlodar, Karaganda or East Kazakhstan regions), where there is an opportunity resolve the issue without shocking people. MMK agreed with these plans and accepted Alimov into the project.

According to their agreement, Alimov pledged to ensure that GM JV received up to 100 MW of power and that the electricity costs stayed below $0.04 per kWh. Alimov guaranteed that this would be achieved by negotiating the purchase of suitable power stations for MMK to buy. He also agreed to provide his own assets, if necessary, such as an electrical substation and industrial base that he owned in the Karaganda region.

In exchange for his contribution, Alimov was promised 35% of the 50% shares owed to MMK in the future holding company; the equivalent share of bitcoins generated by the project; the difference between the cost of electricity at 4 cents per kWh and the real price.

Alimov and MMK agreed on these conditions in the UK – at Mirakhmedov's London residence.