Mining plays a crucial role in Ethiopia’s economic development, offering significant opportunities for growth, job creation, and infrastructure development. Ethiopia is quickly emerging as a significant hub in the Bitcoin mining industry, having generated an impressive 55 million USD over the past ten months.
This remarkable growth can be largely attributed to the abundant and affordable energy resources available in the country, especially hydropower, which have attracted numerous companies, particularly those relocating from China.
The Ethiopian Electric Power (EEP) has committed 600 megawatts of electricity to support these operations, giving Ethiopia a notable 2.25% share of the global Bitcoin miningmarket.
The Minister of Mines Habtamu Tegegne recently announced that the growing utilization of technology helpful for the mining industry such as Bitcoin, has raised the interest of the private sector and foreign investors in the mining sector.
In another development, Ethiopian Investment Holdings also revealed a preliminary agreement with Hong Kong’s West Data Group to inject 250 million USD into boosting the nation’s digital infrastructure. Although the specifics of the deal are still emerging, the government has consistently highlighted these efforts as crucial components of its high-performance computing strategy, which prominently includes Bitcoin mining.
In an interview with BBC News Africa, Kal Kassa, Founder and Educator at Bitcoin Birr in Addis Ababa and Advisor at West Data Group, shared insights into Ethiopia’s rise as a key player in the global Bitcoin mining scene. “Ethiopia is becoming a major hub for Bitcoin mining due to our extremely competitive electricity prices,” Kal explained. “At just 3.2% kilowatt-hour, our electricity is much cheaper than many other parts of the world.”
Kal highlighted Ethiopia’s reliance on renewable energy, with over 92% of its power coming from sources like hydroelectricity, notably the Grand Ethiopian Renaissance Dam (GERD) which is expected to generate six Giga Watts of power from the Nile River. “This combination of low electricity costs and sustainable energy sources indicates why Bitcoin miners are flocking to Ethiopia,” he said.
While Bitcoin mining has traditionally been concentrated in countries like the United States, Russia, and China, rising energy costs in those regions have led many miners to seek out more affordable alternatives. Ethiopia now commands about 5% of the global Bitcoin hash rate, a measure of the computing power used in mining. “Previously, miners were operating in places like Venezuela and Kazakhstan, but Ethiopia now offers a more favorable energy market,” Kal explained.
The influx of miners has had a noticeable impact on the Ethiopian economy. “Currently, there are 20 registered mining companies in Ethiopia, with 11 operational,” Kal said. “Around 80% of these companies are from China, with the remainder coming from Russia and the United States.” This surge in mining activity has translated into substantial revenue for Ethiopia’s state-owned utility, Ethiopian Electric Power (EEP), which earned 55 million USD from Bitcoin miners in the past year. Next year, that figure is expected to rise to 123 million USD.
“The revenue generated from Bitcoin mining can be used to further develop Ethiopia’s power grid and provide electricity to the approximately 50% of Ethiopians who currently lack access,” he noted.
Currently, authorities in Ethiopia are actively developing regulations for crypto mining. Over the past two years, there has been a notable increase in crypto-mining companies establishing operations in the country, driven by relaxed regulatory restrictions and a modest boost in electricity generation capacity. Ethiopia’s growing prominence in the Bitcoin mining industry highlights its strategic use of renewable energy and competitive pricing.
Since mining is pivotal for Ethiopia’s development, offering numerous economic, social, and infrastructural benefits, it is essential for the stakeholders to implement policies that promote responsible mining practices, ensure community engagement, and safeguard the environment.
BTCM, a leading technology-driven cryptocurrency mining company, has announced a landmark acquisition aimed at expanding its operations into Ethiopia, one of the world’s emerging Bitcoin mining hubs. The company will acquire 51-megawatt crypto mining data centers and 17,869 high-performance Bitcoin mining machines in Ethiopia for a total of 14.28 million USD, marking a significant step in its global development strategy.
The deal will be executed in two phases, with BIT Mining acquiring a 35-megawatt operational data center and all mining machines in the first phase, expected to close in the coming months. The second phase, which will involve the transfer of additional data centers upon completion of construction, is expected to follow shortly thereafter. This acquisition not only strengthens BIT Mining’s operational capabilities but also positions the company to take advantage of Ethiopia’s rapidly growing Bitcoin mining market.
This growing presence of foreign mining companies is expected to result in even more substantial revenue for the Ethiopian Electric Power (EEP), with earnings from Bitcoin mining projected to rise from 55 million USD by many folds. These revenues not only benefit the state-owned utility but also contribute to the further development of Ethiopia’s power grid. Kal emphasized the potential of Bitcoin mining to fund much-needed infrastructure improvements, providing a clear example of how the cryptocurrency industry can help drive broader economic development.
For BIT Mining, this acquisition marks a pivotal moment in its strategic global expansion. Xianfeng Yang, CEO of BIT Mining commented, “This transaction represents a significant milestone in advancing our global development strategy. With our expanded market presence and robust operational capabilities, we are well-equipped to further solidify our competitive edge and enhance our profitability and financial standing, paving the way for long-term, sustainable growth.”
By acquiring data centers and mining machines in Ethiopia, BIT Mining will be able to tap into the country’s affordable electricity, renewable energy sources, and growing infrastructure to scale up its operations. This acquisition aligns with BIT Mining’s vision of focusing on self-operated mining and data center operations, positioning the company to capitalize on the rapidly increasing demand for cryptocurrency mining resources worldwide.
Ethiopia’s position as a competitive player in the Bitcoin mining market is expected to grow. The combination of low electricity costs, abundant renewable energy, and a strategic location has made the country an attractive destination for international mining companies. BIT Mining’s acquisition of data centers and mining machines in Ethiopia is not only a testament to the country’s appeal but also underscores the potential for Ethiopia to continue playing a central role in the global Bitcoin mining industry.
As the country’s mining sector expands, it will continue to provide opportunities for economic growth, infrastructure development, and technological advancement.
Bitcoin emerged in the aftermath of the global financial crisis in 2008 as a decentralized alternative to standard currency systems, which are under scrutiny by central banks. The decentralization stems from the blockchain technology as a public ledger where all verified transactions are being recorded. The verification itself is not conducted by any central authority but by a large network of nodes that undertake and solve complex mathematical problems. This cryptographic element has given the name to the whole family of crypto currencies. As a reward for the verification, a pre-specified number of bit coins are emitted forming an algorithmically given monetary supply.
In parallel to fiat money being historically backed up by gold, which needs to be physically mined, the process of Bitcoin creation is also referred to as mining as work of the network is needed to verify the transactions and be rewarded as a miner.
As all the transactions are being recorded, the system boasts transparency, even though the actual addresses of sending and receiving parties are represented by alphanumerical chains that cannot be directly linked to a specific geographic location or a person. In addition, creating a new address (wallet) is trivial and free so that hypothetically, a new one can be created for every single transaction.
BY ABEBE WODEGIORGIS
THE ETHIOPIAN HERALD TUESDAY 17 DECEMBER 2024
