Ethiopia has become a prominent destination for Bitcoin mining operations since China expelled the industry from its borders in 2021. China’s leading players dispersed globally to find new locations accommodating their energy-intensive business practices. Many arrived in Africa last spring, with cargo containers housing powerful mining computers appearing near electricity substations linked to the Grand Ethiopian Renaissance Dam.
Ethiopia Welcomes Bitcoin Mining
Despite prohibiting the trading of cryptocurrencies, Ethiopia permitted Bitcoin mining operations beginning in 2022. Mining involves the process of introducing new units of Bitcoin into circulation and securing the underlying blockchain. Miners require significant electricity consumption to compete for new BTC, making electricity a fundamental cost of their operations. Ethiopia boasts some of the lowest electricity costs globally.
It’s particularly appealing to Chinese businesses, given Ethiopia’s growing ties to China over the last decade. Many Chinese companies have been involved in constructing the $4.8 billion dam, which will provide power to the miners.
Mining, unlike other power-intensive industries, is both demand-agnostic and location-agnostic. Miners prioritize cheap power sources regardless of geography or supply consistency. For instance, Norway powered about 1% of global Bitcoin miners in 2021, mainly with hydropower. “Ethiopia will become one of the most popular destinations for Chinese miners,” said Nuo Xu, founder of the China Digital Mining Association, to Bloomberg. Russia has also embraced Bitcoin mining while prohibiting its use as a payment method.
Bitcoin Mining Risks
Regulators face challenges in assessing the costs and benefits of hosting Bitcoin miners. Although mining can bring significant earnings, it can also strain electricity grids during peak demand periods. For instance, Kazakhstan and Iran, once global Bitcoin mining leaders, reversed course due to concerns over power consumption. According to Hashlabs Mining CEO Jaran Mellerud, countries may face two primary risks: running out of available electricity for miners to expand and sudden government disapproval, leading miners to relocate abruptly. Stay updated with us on Google News.
