Will Ethiopia become the new mining mecca? – BitcoinBlog.de – the blog for Bitcoin and other virtual currencies

More and more Bitcoin miners are apparently discovering Ethiopia. The country scores points with cheap and green energy as well as a government that is friendly to miners. But it also has its location disadvantages.

Since the Grand Ethiopian Renaissance Dam became operational, Ethiopia has become increasingly attractive to Bitcoin miners. Chinese Bitcoin miners in particular are apparently flocking to the North African country.

The most important argument for Ethiopia is the second cheapest electricity prices in the world. Thanks to Africa’s largest dam, the country has enjoyed a significant surplus of green electricity for a year and a half. In addition, there is a government that is autocratic but reasonably stable and friendly to the miners. A poorly developed power grid and strict regulation are less advantageous.

The Business Mirror asked around the industry to gauge the extent of miners’ interest in Ethiopia. He cites mining equipment supplier Luxor Technology, which reports that Ethiopia has been one of the world’s top recipients of mining equipment since September. The state-owned electricity supplier told the magazine that it had already signed supply contracts with 21 Bitcoin miners – how fitting! – all but two of which come from China. And the founder of the Chinese Digital Mining Association says Ethiopia will become “one of the most popular destinations for Chinese miners.”

The government of Ethiopia allowed Bitcoin mining in 2022 but continues to ban cryptocurrency trading. One of the motives for legalizing mining was that mining companies mainly pay their electricity bills in foreign currency, i.e. foreign exchange.

Foreign exchange is apparently in short supply in Ethiopia. This makes it more difficult to import goods and puts pressure on the local currency, the Birr. The government is trying to counteract this by forcing exporters of goods, such as coffee producers, to pay the foreign currency they collect to the central bank. Since the electricity supply is subject to a state monopoly, the miners’ foreign exchange payments flow directly to the state.

With an electricity price of the equivalent of $3.14 per kilowatt hour, the energy supplier also earns significantly more from miners than from private consumers, who only pay 0.6 cents per kilowatt hour.

In addition to the low electricity prices, what is favorable for mining is the advantageous climate, which is close to ideal temperatures for Bitcoin mining on the Ethiopian plateau. The geopolitical conditions – especially the close proximity to China – also make Ethiopia attractive for Chinese miners.

However, the power grid is probably less optimal. Although Ethiopia now generates more than enough electricity through the large dam, the country has not yet managed to connect significantly more than half of its inhabitants to the electricity grid. Those who have a power connection suffer from regular blackouts, which experts attribute not to a lack of electricity, but to outdated components in the power grid.

The miners now come in handy to purchase the excess electricity. But they run the risk of becoming a scapegoat for blackouts, as in Iran; Possibly, as a conveniently located consumer of electricity – perhaps directly at the dam – they could reduce the motivation to tackle the necessary expansion of the network. This could lead to a controversy about the economic function of miners, as is already the case in China, Kazakhstan and the USA.

Ethiopia could also prove to be a problematic location from a regulatory perspective. The government only allows directly licensed miners; Those who are already allegedly operating under cover are threatened with persecution. The government’s habit of shutting down the Internet at regular intervals to block unrest and discontent in regions or organizations could also be problematic. In some regions in recent years, the internet and mobile communications have been switched off several times for more than a month, and in the rebellious Tigray region even for more than two years. Such a shutdown can of course also have a serious impact on miners.

Apparently the miners are happy to take this risk as long as they get cheap electricity in return. And the Grand Ethiopian Renaissance Dam provides this in abundance. The largest dam in Africa is located on the Blue Nile in the western Ethiopian region of Benishangul-Gumuz, near the border with Sudan. It has been under construction since 2011 and includes a two-kilometer-long and 145-meter-high wall. The reservoir holds 74 billion cubic meters of water. It was filled from mid-2020, which initially led to conflicts with neighboring countries as they feared it would dry up the Nile. However, these concerns were washed away by heavy rains in the following years. The first turbines went into operation in February 2022, currently generating around four gigawatts of electricity. In total, the dam is expected to generate more than six gigawatts of electricity, meaning that the people of Ethiopia will be able to rely almost exclusively on renewable energy.