After Beijing’s abrupt crypto ban in 2021, Chinese Bitcoin miners were forced out of their homeland. Now, they are increasingly turning their attention to Ethiopia, enticed by its affordable energy and favorable climate.
These miners, buffeted by political and economic challenges, are especially enticed by Ethiopia’s remarkably low electricity costs and a government increasingly receptive to their presence.
The Chinese miners’ migration could name Ethiopia as a sanctuary for Bitcoin mining, potentially bolstering foreign currency earnings. However, amid this opportunity lies a sensitive issue in a country where a significant portion of the population lacks access to electricity.
Bitcoin Miners in Ethiopia
Last spring, cargo containers materialized near electricity substations linked to Africa’s largest dam, the Grand Ethiopian Renaissance Dam (GERD). These containers housed potent, energy-consuming computers.
The arrival of these computers is a clear indication that Chinese Bitcoin miners, traversing nations for affordable power and lenient regulations after being driven away from their homeland, had reached the Horn of Africa.
Despite Ethiopia’s ban on cryptocurrency trading, it permitted Bitcoin mining from 2022 onward, which strengthened its ties with China. China played a significant role in constructing the US$4.8 billion dam from which the miners intend to draw their power.
Ethiopia has become a unique prospect for cryptocurrency mining firms, particularly amidst global climate change and power scarcity concerns, triggering backlash against the US$16 billion-a-year industry elsewhere.
For Chinese companies, Ethiopia offers a distinct advantage, as they have faced tough competition from local rivals in Texas, the current epicenter of Bitcoin mining. The previous epicenter was China before the 2021 ban ended its reign and prompted numerous companies to relocate.
Yet, the migration of Chinese Bitcoin miners to Ethiopia represents a risky venture for the companies and the nation. Several developing countries, including Kazakhstan and Iran, initially embraced Bitcoin mining only to backtrack when its energy consumption sparked domestic unrest.
“Firstly, countries can run out of available electricity, leaving no room for miners to expand,” said Jaran Mellerud, chief executive of Hashlabs Mining. “Secondly, miners can suddenly be deemed unwelcome by the government and be forced to pack up and leave.”
Ethiopian industry executives, speaking anonymously to safeguard government relations, assert that their officials remain cautious about the controversy surrounding Bitcoin mining.
According to Luxor Technology, an estimate suggests that Ethiopia has ascended to become one of the world’s leading destinations for Bitcoin mining machines. Ethan Vera, the Chief Operations Officer at Luxor, noted that the company’s initial significant transactions to transport equipment to Ethiopia occurred in September.
The state power monopoly has reportedly secured power supply agreements with 21 Bitcoin miners, with only two being Chinese.
Bitcoin Mining and Electricity Challenges
Bitcoin mining serves two main purposes: validating transactions to thwart fraud and adding new blocks to the blockchain. The activity itself is consequently generating fresh Bitcoins in a decentralized manner.
The freshly mined Bitcoins can then later be used for various purposes, such as buying goods and services and trading on cryptocurrency exchanges. They can also be held as an investment or used to participate in live sports betting.
Miners use robust computing power and advanced equipment to solve intricate cryptographic hash puzzles for verifying transaction blocks. This task demands substantial computational capacity, and as a reward, miners earn Bitcoin, which enters circulation, hence the term Bitcoin mining.
Bitcoin mining’s electricity consumption rivals that of entire countries, although efforts are underway to transition to greener energy sources. Typically, Bitcoin mining is a large-scale commercial operation conducted by companies utilizing data centers housing numerous mining computers in warehouses.
Despite adding new generation capacity, nearly half of the Ethiopian population still lacks access to electricity. As such, it heightens the sensitivity of mining discussions.
Approximately 80% of Ethiopia grapples with historic challenges of voltage fluctuations and power outages, as per the 2015 World Bank report. Despite efforts to boost electricity generation capacity and enhance access to power, the demand continues to rise, straining resources. With investments in hydropower, wind, and solar energy, abundant renewable energy sources are being tapped into.
The country also exports electricity to neighboring nations for economic gains. The energy sector remains vital for Ethiopia’s economic growth, necessitating ongoing efforts to tackle challenges and improve the energy landscape. Nonetheless, it presents a promising avenue for foreign exchange earnings through Bitcoin mining.
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