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It’s time to start learning Dzongkha, the language of Bhutan, a South Asian country on the eastern edge of the Himalayas. Bhutan is one of the two confirmed nation-states actively mining Bitcoin today, with the other being El Salvador.
Bhutan’s Strategic Hydroelectric Initiative
Bhutan made a strategic decision to develop a world-class hydroelectric power infrastructure. Leveraging one of the largest water reserves globally, Bhutan’s geographical features create swift-flowing rivers, making it a natural haven for hydroelectric power.
With an abundance of electricity, much of which is exported to energy-deficient neighboring India, Bhutan has ventured into building Bitcoin mines. This initiative aims to ensure the nation’s economic self-reliance and socio-economic development.
Bitcoin Mining and Economic Self-Reliance
By utilizing its hydropower infrastructure for Bitcoin mining, Bhutan bolsters its economic self-reliance and socio-economic development. Bhutan could further strengthen its position by being the first nation to adopt a Bitcoin standard.
Bhutan’s Bitcoin Holdings
According to Arkham Intelligence, Bhutan currently holds over 13,000 BTC. This makes Bhutan the fourth-largest government holder of Bitcoin worldwide, trailing only behind the US, China, and the UK. Interestingly, Bhutan surpasses El Salvador in Bitcoin holdings. Since 2023, Bhutan has continued to expand its Bitcoin mining capabilities.
With a population of around one million, Bhutan’s Bitcoin holdings equate to approximately 0.122 BTC per person, or nearly $8,000 per individual.
Implications of a Bitcoin Standard
As fiat currencies face global devaluation, Bhutan’s Bitcoin holdings and mining infrastructure gain more significance. On a Bitcoin standard, Bhutan could maintain its currency, the Ngultrum, pegged to Bitcoin. This would be similar to how countries pegged their currencies to gold under the gold standard of the 19th and early 20th centuries.
Under this system, Bhutan’s currency would circulate alongside Bitcoin, with notes redeemable for BTC. The currency would remain fiduciary, not fully backed by Bitcoin, similar to the partial gold backing of notes under the gold standard.
However, adopting a Bitcoin standard would mean Bhutan could not conduct independent interest rate policies without depegging from Bitcoin, a potential drawback for any nation-state.
Bhutan’s Evolution
Bhutan did not have electricity until 1966. For comparison, England opened its first hydroelectric plant in 1878, and the US opened its first power plant in 1882. Despite being ranked 133rd in land area and 160th in population today, Bhutan is emerging as a 21st-century leader.
Investment in hydropower has already fueled economic growth. Bhutan’s decision to harness its water resources for electricity production and Bitcoin mining could significantly alter the country’s economic landscape.
By backing the Ngultrum with Bitcoin, Bhutan could set a precedent, similar to the Classical Gold Standard, and establish the rules for a Bitcoin standard that other countries might follow. This could potentially position Bhutan as a lender of last resort for nations and institutions in crisis.
Under a Bitcoin standard, Bhutan might expect “mild deflation, low nominal interest rates, and good output growth,” as suggested by Warren E. Weber in his 2015 thought experiment for the Bank of Canada.
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Kadan Stadelmann is a blockchain developer, operations security expert, and Komodo Platform’s chief technology officer. His experience ranges from working in operations security in the government sector to launching technology startups, application development, and cryptography. Kadan began his journey into blockchain technology in 2011 and joined the Komodo team in 2016.
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