Africa’s green energy potential attracts nomadic crypto miners

Addis Ababa. Ethiopia, Africa’s most affordable electricity supplier, is retooling its green energy sources for crypto mining, with an initial offering to Chinese investors. Where’s next?

Nomadic crypto miners looking for affordable energy are looking to Africa, with Ethiopia emerging as a prime location for blockchain mining.

This hub to the mainland is powered by its abundant renewable resources, including solar, wind and hydroelectric power.

Ethiopia, with its colossal hydroelectric dam, has seen a greater influx of bitcoin miners, particularly from China, who are evading Beijing’s tight control over crypto activities. China has suppressed the activity due to its high energy needs.

Bloomberg reported that “19 of 21 mining electricity supply deals made 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 series of Chinese companies looking to establish a presence in the Horn of Africa.

“The Asian country is both the largest provider of foreign direct investment and the largest bilateral creditor to Ethiopia, and President Xi Jinping upgraded ties last year.”

With the bitcoin price surging to US$50,000, reaching a peak reached last month amid the launch of US spot bitcoin exchange-traded funds (ETFs), the spotlight has shifted to sustainable practices in the crypto-mining industry turned.

Known for its high energy consumption, crypto mining is gradually moving away from traditional fossil fuel sources to more sustainable sources.

This shift is due in part to increasing scrutiny from both the public and regulators about the environmental impact of mining activities.

Africa’s renewable energy sources provide a solution to this challenge and provide a path for miners to reduce their carbon footprint and operating costs.

Among the ten countries with the lowest household electricity prices worldwide in June 2023, four African countries – Ethiopia, Sudan, Libya and Angola – stand out, reflecting the continent’s competitive advantage in energy costs. This affordability is crucial for cryptocurrency miners, for whom energy expenses are often the most important operating cost.

Crypto mining involves solving math problems that require powerful computer hardware with high processing power and speeds that generate thousands, millions, and billions of hashes every second.

The compelling mix of low electricity costs and sustainable energy sources therefore makes Ethiopia, and Africa more broadly, an attractive destination for crypto mining operations. A 2023 KPMG report highlights the symbiotic relationship between Bitcoin mining and renewable energy sources.

This suggests that cryptocurrency mining can act as a stabilizing force for power grids and make efficient use of underutilized green energy.

Furthermore, by converting waste gases into electricity, bitcoin mining can play a role in reducing methane emissions, illustrating the potential for cryptocurrency operations to positively contribute to environmental goals.

The resurgence of Bitcoin’s value after the 2022 price crash has reignited the debate about its potential to rival traditional currencies such as the US dollar.

This recovery boosted the confidence of cryptocurrency advocates, fueling discussions about the long-term viability and impact of digital currencies on the global financial system.

Ethiopia’s push for 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 absorption of its power is of crucial importance given the heavy expenses that the Grand Ethiopian Renaissance Dam absorbed ($5 billion).

Capitalizing 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 countries in the digital economy. However, with millions of its citizens still without electricity, Ethiopia will have to balance revenue from crypto mining with rolling out power across the country to prevent widespread protests.

Ideally, supporters say, crypto mining will drive demand for local energy production, stimulate investment in green energy infrastructure and create jobs in both the energy and technology sectors.