How Military Conflict Could Impact Bitcoin Mining in Iran

Over the past few years, Iran has become one of the most active jurisdictions in the world for Bitcoin mining, both legally and illegally. As of early June 2025, the country was responsible for an estimated 3% to 4.6% of the global Bitcoin hashrate, depending on methodology and time period. This made Iran one of the top ten countries in terms of mining volume. 

To realize the implications of potentially losing this share of the bitcoin hashrate, it is necessary to look at the country's energy structure, regulatory framework, and geopolitical context that underpins its mining economy.

Energy Basis: Cheap Power from Fossil Fuels

Iranian mining operations rely on extremely cheap electricity, which has been subsidized by the state for decades. As of 2025, the electricity generation mix in Iran was distributed as follows:

• Approximately 81% comes from natural gas;
• Around 14% is derived from petroleum products;
• Less than 5% is contributed by hydroelectric and nuclear sources combined.

This structure allows the government to maintain low domestic power tariffs. In some industrial contexts, rates can go as low as $0.005 to $0.05 per kilowatt-hour. Although authorities have tried in recent years to introduce higher tariffs for private miners, large operators continue to enjoy privileged access to cheap power. This often happens due to corruption (autocracies have corruption, surprise, right?) and informal administrative preferences, including access to industrial power grids at reduced rates or the ability to consume subsidized electricity intended for other purposes.

Legal and Illegal Mining in Iran

Since 2019, Iran has been one of the first countries to officially legalize industrial-scale Bitcoin mining. Since then, the government has issued more than 10,000 licenses to both individuals and corporate entities. However, the licensed sector represents only a small portion of the industry. According to estimates by Tavanir, the state-owned power utility, as well as international observers, up to 85% of Iran’s total mining capacity operates outside the law. Illegal mining farms often steal electricity directly from the grid and are frequently disguised as residential, agricultural, or religious buildings, including mosques, warehouses, farms, and private homes.

By 2025, the Iranian government had seized more than 250 000 unlicensed mining devices. Crackdowns tend to increase during peak electricity demand, particularly in the summer months, when extreme heat and overburdened infrastructure lead to rolling blackouts in major cities.

You might also be interested in reading: How Russia is Building a Shadow Crypto Mining Empire

The Role of the IRGC and Foreign Investment

According to the National Council of Resistance of Iran (NCRI), the Islamic Revolutionary Guard Corps (IRGC) has become one of the most powerful actors in the Iranian mining industry. Through a network of front companies and preferential access to military facilities, subsidized fuel, and cheap electricity, the IRGC controls several of the country’s largest mining farms. These operations are not subject to oversight and are allegedly used to generate hard currency outside the scope of international sanctions.

China has also played an important role. Several Chinese mining pools and hardware investors are active in Iran’s Special Economic Zones (SEZs), particularly in the Rafsanjan and Maku regions. These zones provide a range of fiscal and regulatory incentives, including:

• Exemptions from corporate income tax for up to 20 years;
• Zero VAT rates on imported mining equipment;
• Controlled electricity tariffs;
• Protection from interference by domestic regulators.

Among the Chinese pools known to operate via Iranian IP addresses and mining farms are F2Pool, ViaBTC, and Antpool. Collectively, they may be responsible for 20% to 30% of Iran’s total hashrate, equivalent to roughly 6 to 12 EH/s depending on the period and operational scale.

Infrastructure Vulnerabilities in Iran’s Mining Sector

Iran’s energy system is aged and highly vulnerable. Transmission losses exceed 13%, and there is a chronic lack of investment in infrastructure maintenance. The main reasons include:

• International sanctions that limit access to capital and imported equipment;
• Subsidized electricity pricing that reduces revenue for energy providers;
• Budgetary priorities that favor military and security spending.

In the context of extreme summer temperatures and growing residential demand, these weaknesses become especially visible. The proliferation of illegal mining operations further aggravates the situation, drawing criticism from both citizens and government institutions.

Despite these challenges, Bitcoin mining remains an attractive source of income for sanctioned actors and an important means of obtaining foreign currency. Until June 2025, Iran’s mining sector was considered one of the most dynamic, controversial, and geopolitically sensitive in the world.

Military Strikes on Iran’s Energy Infrastructure

On the night of June 13, 2025, Israel carried out a series of air and drone strikes across Iranian territory. While the primary targets were military and nuclear infrastructure, several critical energy and industrial facilities were also affected.

The following sites were confirmed to have been damaged or partially taken offline:

• South Pars Gas Field, the world’s largest natural gas reserve, was among the hardest hit. Unit 14 of the complex was struck, resulting in a powerful explosion and fire. Output at the field reportedly dropped by around 12 million cubic meters per day.
• Shahran Oil Depot, located near Tehran, suffered structural damage. Fires broke out and multiple storage tanks were destroyed. Iran’s Ministry of Petroleum (MoP) confirmed that the fire had been contained.
• Industrial zones in Bushehr and Isfahan provinces, home to energy production facilities, were also targeted. However, as of this writing, there have been no official confirmations of damage to power plants or transformer stations.

At the time of publication, no direct hits to power transmission lines, hydroelectric facilities, or gas distribution hubs serving mining operations had been reported. However, the mere fact that critical energy infrastructure – including gas fields and oil storage depots – came under attack could have consequences for mining operations across the country.

According to recent monitoring data, the global Bitcoin hashrate has seen significant fluctuation over the past week. Between June 12 and June 16, the total hashrate dropped by approximately 16%. It is plausible to assume that a portion of this decline may be linked to a reduction in Iran’s mining output following disruptions to the country’s energy supply. An additional contributing factor may be the spike in oil prices, as oil remains an essential energy source for electricity generation in several mining-dependent regions worldwide.

On the chart, it is easy to see that the drop in hash rate looks like a sizable one.

Potential Consequences of Military Action for the Global Mining Industry

In the wake of strikes on Iran’s energy assets and rising energy market volatility, the international mining community now faces increased operational risk. The observed hashrate fluctuations, coupled with soaring fuel costs and emerging shifts in energy distribution priorities, are already placing pressure on miners not only in the Middle East but globally.

1. Increased stress on national power systems. Reduced gas and oil output may impair the ability of public utilities to maintain consistent power generation.
2. Prioritization of strategic facilities. In case of an energy shortfall, governments are expected to allocate electricity first to medical, military, and other critical facilities — potentially cutting supply to industrial and private mining farms.
3. Rising electricity tariffs. With natural gas generation under strain, subsidies may be rolled back and tariffs raised, particularly for large-scale miners.
4. Tightened enforcement. Under growing instability, authorities may ramp up inspections and crackdowns on unlicensed mining operations to conserve resources for public use.
5. Search for new jurisdictions. It is possible that Chinese mining pools and Iranian companies will need to seek alternative locations and legal environments to continue their operations. This could lead to a redistribution of the global hashrate.

Although there have been no confirmed strikes directly targeting infrastructure tied to Iran’s mining sector, the indirect effects of military action on the country’s energy network are already becoming apparent — and may escalate further if the conflict continues.

At the same time, the genius of Satoshi Nakamoto, who envisioned the possibility of adjusting the difficulty of mining when the hash rate drops, should once again be extolled. Thanks to this mechanism, the network automatically increases incentives for miners: The truth is, the easier it is to find new blocks — the easier it is.

Thus, Bitcoin's long-term architecture looks monumental.