NOMADIC crypto miners in search of affordable energy are eyeing Africa, with Ethiopia emerging as a prime location for blockchain mining.
This pivot towards the continent is driven by its abundant renewable sources including solar, wind, and hydroelectric power.
Ethiopia, with its colossal hydroelectric dam, has seen an increased inflow of bitcoin miners especially from China, who are dodging Beijing’s tight controls on crypto activities. China has cracked down on the activity due to its high energy requirements.
Bloomberg reported that “19 of 21 electricity-supply deals for mining struck so far are with Chinese companies.”
China has become an important investor in the Ethiopian country and bitcoin mining companies are the latest in a string of Chinese companies seeking to set up a presence in the Horn of Africa.
“The Asian country is both the biggest supplier of foreign direct investment and the top bilateral creditor to Ethiopia, and President Xi Jinping upgraded ties last year.”
With the bitcoin price soaring towards US$50,000 and nearing a peak reached last month amidst the launch of U.S. spot bitcoin exchange-traded funds (ETFs), the spotlight has turned on sustainable practices within the crypto mining industry.
Known for its high energy consumption, crypto mining is gradually moving away from traditional fossil fuel sources towards more sustainable ones.
This shift is partly due to the increasing scrutiny from both the public and regulators over the environmental impact of mining activities.
Africa’s renewable energy resources offer a solution to this challenge, providing a pathway for miners to reduce their carbon footprint and operational costs.
Among the ten countries with the lowest household electricity prices globally in June 2023, four African nations — Ethiopia, Sudan, Libya, and Angola — stand out, reflecting the continent’s competitive advantage in energy cost.
This affordability is crucial for cryptocurrency miners, for whom energy expenditure is often the most significant operational cost.
Crypto mining involves solving math problems that require powerful computational hardware with high processing power and speeds that generate thousands, millions, and billions of hashes every second.
The compelling blend of low electricity costs and sustainable energy sources thus makes Ethiopia, and Africa more broadly, an attractive destination for crypto mining operations.
A 2023 KPMG report underscores the symbiotic relationship between Bitcoin mining and renewable energy sources.
It posits that cryptocurrency mining can serve as a stabilising force for power grids and make efficient use of underutilized green energy.
Furthermore, by converting waste gases into electricity, bitcoin mining could play a role in reducing methane emissions, illustrating the potential for cryptocurrency operations to contribute positively to environmental objectives.
The resurgence of Bitcoin’s value following the 2022 price crash has reignited the debate on its potential to rival traditional currencies like the U.S. dollar.
This recovery has bolstered the confidence of cryptocurrency advocates, fueling discussions on the long-term viability and impact of digital currencies on the global financial system.
Ethiopia’s foray into clean bitcoin mining, supported by its renewable energy capabilities, is seen as a forward-thinking approach to economic development.
For the East African country, the uptake of its power is crucial given the heavy expenditure that the Grand Ethiopian Renaissance Dam gobbled up ($5 billion).
By capitalising on its green energy potential, Ethiopia not only positions itself as a leader in sustainable cryptocurrency mining but also highlights the broader opportunities available to African nations in the digital economy.
However, with millions of its citizens still without electricity, Ethiopia will need to balance the income from crypto mining with the rollout of power across the country to prevent widespread protests.
Ideally, supporters say, crypto mining would drive demand for local energy production, stimulating investment in green energy infrastructure and creating jobs in both the energy and tech sectors.
