Paraguay to become Bitcoin mining hub in Latin America

Hashrate Index, a mining insight group, has identified Paraguay as a potential destination to establish the next Bitcoin mining center in Latin America. Despite being one of the smallest countries in the region, Paraguay has favorable conditions to support this emerging industry. Among the most important advantages is the abundance of clean hydropower sources, which provide a sustainable and cost-effective source of energy.

Nevertheless, the growth potential of Paraguay’s cryptocurrency mining industry may be hindered by the government’s current stance on this type of activity. While elements are working in favor of Paraguay’s Bitcoin mining industry, the government’s stance on the matter could hinder the country’s progress in this area

Will Paraguay emerge as a significant Bitcoin mining hub?

Although not widely recognized for its cryptocurrency connections, Paraguay has now emerged as one of the most appealing destinations for Bitcoin miners in Latin America, according to mining insight firm Hashrate Index. The country offers several advantages that could potentially establish it as a significant hub for cryptocurrencies in the region.

The primary advantage that sets Paraguay apart from other countries in the area and has attracted miners following the Chinese mining exodus is its abundant supply of clean, affordable hydropower. This power can be used to construct large-scale Bitcoin mining, most of which originates from the Itaipu dam, where Paraguayans reportedly use only about 10% of the total energy generated.

While much of this energy is exported to nearby countries, the group suggests that it could be harnessed to power massive mining operations in the future.

Certain disadvantages

Paraguay may not be an ideal place to set up a bitcoin mining operation due to two reasons. Firstly, the hot and humid climate in summer can reduce the lifespan of air-cooled mining rigs.

Second, the government has an unfavorable view of bitcoin mining, which has led to an increase in the power fee of over 50% in January, reducing the profit margins of established miners and making it difficult for them to provide hosting services for third parties.

Paraguay is rapidly growing as a major cryptocurrency mining hub

ANDE, the national electricity provider, offers miners competitive rates of around $26 per MWh through its venture. Despite this advantage, Paraguay’s climate is an obstacle to cryptocurrency mining.

In the summer months from November to March, the temperature can rise to 40 degrees Celsius, and the average annual humidity is around 70%. These environmental conditions create challenges for air-cooled bitcoin mining rigs, as they require special attention to cooling in hot environments and are prone to corrosion from moisture, which can shorten the life of critical components.

Although the price of electricity in Paraguay is lower than in popular US mining states, it is still worse than neighboring Argentina. In addition, Brazil and Argentina have customs duties that can reach up to 80% of equipment costs when imported

Although Paraguay’s national grid operator, Administración Nacional de Electricidad (ANDE), completely controls the market and dictates terms to counterparties, there is another nuance to consider. The company also requires a percentage of the miner’s income as payment for electricity, typically from 15% to 20%.

Final thoughts

The country faces obstacles with its distribution equipment, which is still tied to ANDE structures, and regulatory barriers. But if the government changes its approach, Paraguay has the potential to emerge as the new hub for bitcoin mining.

Ken Emmanuel is a blockchain content writer, a Web3 enthusiast and a social media management strategist, he enjoys writing educational content to help people become more knowledgeable and inspired. The growth of any organization he works with is always his priority. He is a geographer by profession and loves to read.