ZoneBitcoin EditorialEthiopia, a country traditionally known for its coffee, Rastafarianism, and its earthen churches, has emerged as an unexpected powerhouse in the Bitcoin world. This surprising development is due in part to its abundant energy resources and favorable environment for Bitcoin mining.
The country has considerable assets, particularly thanks to its " Great Renaissance Dam " and its immense hydroelectric potential (5 megawatts). Since 300, Ethiopia has positioned itself as a prime destination for Bitcoin mining, particularly after legalizing this activity.
This strategic decision quickly attracted the attention of major players in the sector, particularly mining companies looking for new exploitation territories.
The historical context of mining in Ethiopia
In February 2024, Addis Ababa took a decisive step by signing electricity supply agreements with twenty-one companies, nineteen of which were Chinese. This Sino-Ethiopian collaboration comes at a particular time: after China's mining ban in 2021, Chinese companies sought new bases of operation. Ethiopia benefits from considerable natural assets that make it an ideal destination for Bitcoin mining. First, the country has "cost-effective" electricity, about a third cheaper than in Texas, currently considered the world's Bitcoin mining hub.
Addis Ababa's geographical location is also a major advantage. Situated at an altitude of over 2000 meters, the Ethiopian capital enjoys moderate temperatures, regularly dropping below 20 degrees. This characteristic significantly reduces equipment cooling costs, as computers cool themselves virtually in the natural environment.
Office " Luxor Technology " estimates that Ethiopia has about 3000 megawatts of surplus electricity. This exceptional energy capacity could allow the country to host up to 5% of the world's mining activities within two years.
For Ethiopia, this new industry represents a major economic opportunity. However, this rapid emergence raises crucial questions. Although mining is legal, cryptocurrency exchanges remain banned in the country. Moreover, this energy-intensive activity could test the country's energy security, as it did in Kazakhstan for example, where networks have been regularly saturated by Bitcoin farms.
Ethiopia's current energy infrastructure
At the heart of Ethiopia's Bitcoin mining boom is a rapidly evolving energy infrastructure, marked by significant advances as well as considerable challenges.
The Grand Ethiopian Renaissance Dam (GERD) represents the backbone of this energy transformation. With an investment of $4,8 billion, this colossal project, launched in 2011, could meet the country's energy needs and satisfy those of bitcoin miners.
The construction of this monumental project currently involves 6 employees and six different contractors. After years of diplomatic wrangling with Sudan and Egypt, this colossal project will double the country's electricity production.
Technical challenges
Technical obstacles are a major obstacle to network development. Currently, Ethiopia loses up to 23% of its electricity due to outdated facilities. This situation is compounded by several factors, including an insufficient bill collection rate. Furthermore, faulty transmission networks and outdated distribution equipment are disrupting the project's smooth progress.
To overcome these challenges, the Ethiopian government is adopting a new approach. While previously everything was financed by public money, the authorities are now opening up to the private sector. This transition is accompanied by new rules allowing companies to negotiate directly with the government, without going through complex and administratively burdensome tenders.
The rapid growth of Bitcoin mining is bringing significant economic changes to Ethiopia, particularly in terms of income and employment.
The Benefits of Bitcoin Mining in Ethiopia
Bitcoin mining is now a major source of foreign currency for Ethiopia. Indeed, this activity could even surpass traditional exports like coffee and gold. This prospect is particularly crucial for a country currently in debt default and actively seeking ways to raise foreign currency.
In February 2024, the Ethiopian government took a decisive step by signing a memorandum of understanding with 21 mining companies, mainly Chinese. This strategy has proven doubly beneficial: on the one hand, the state receives revenue in dollars for operating licenses, and on the other, it monetizes excess energy that would otherwise remain unexploited.
The expansion of mining in Ethiopia is attracting more miners, notably thanks to:
- Electricity costs among the lowest in the world
- Favorable regulations since 2022;
- A strategic geographical position.
Creation of local jobs
The development of mining is also accompanied by training initiatives. In particular, a $250 million agreement with West Data Group aims not only to develop digital infrastructure for mining, but also to train the local workforce in artificial intelligence.
This economic diversification is part of a broader development strategy. The recently created industrial parks have already demonstrated their effectiveness:
- Creation of 19 direct jobs
- Mobilization of $118 million in private investment
- Training of more than 7 people in technical skills.
Particularly noteworthy, these initiatives have primarily benefited women aged 18 to 25, who account for 66% of the jobs created. This inclusion of women is all the more significant given that the unemployment rate for women is almost twice the national average.
Bit Mining, a major player in the sector, plans to significantly expand its presence in Ethiopia. The second phase of its expansion, scheduled for March-April 2025, will add 51 megawatts of capacity to its centers. This growth is already producing tangible results, as evidenced by the 29% increase in the company's share price.
Social and environmental challenges
Despite the economic promise of Bitcoin mining, Ethiopia faces major social and environmental challenges that require careful attention. Access to electricity remains a crucial issue. Currently, about 40% of Ethiopia's population still lacks access to reliable electricity. according to World BankThis situation raises legitimate questions about the allocation of the country's energy resources to Bitcoin mining.
In 2021, 567 million people in sub-Saharan Africa did not have access to electricity, representing more than 80% of the global population without access..
According to the World Bank, Ethiopia has the third-largest energy access deficit in sub-Saharan Africa. Therefore, the use of a significant portion of electricity generation for Bitcoin mining raises debates, particularly regarding the fairness of energy resource distribution.
Although Ethiopia relies on hydroelectric power to power its mining operations, environmental concerns persist. Nevertheless, using hydroelectric power offers significant advantages:
- A significant reduction in environmental impact compared to traditional mining using fossil fuels
- Reduced operational costs thanks to hydroelectricity
- A more sustainable approach to bitcoin mining
The Ethiopian government is taking a pragmatic approach by killing two birds with one stone: revenues generated by the sale of licenses and electricity to miners are used to finance the development of energy infrastructure. However, it is up to the authorities in Addis Ababa to decide whether these revenues will actually be allocated to the goal of connecting millions of Ethiopians to the electricity grid.
Mining companies present in Ethiopia:
Here are some of the companies involved in cryptocurrency mining in Ethiopia:
- Uminers : This company has launched the construction of a new data center in Ethiopia, with a planned capacity of 100 megawatts for its first phase, completed in the fall of 2024.
- Bit Mining : The company acquired 51 megawatts and 18 Bitcoin mining rigs in Ethiopia, taking advantage of low energy costs to reuse otherwise obsolete equipment.
- BitCluster : This Russian company plans to build a 120-megawatt data center near Addis Ababa, aiming to make Ethiopia a leader in Bitcoin mining.
- Phoenix Group : Specializing in Bitcoin mining, this Emirati company has acquired an 80-megawatt renewable energy project in Ethiopia, aiming to reduce the carbon footprint of its operations while increasing its capacity.
These companies, primarily from China, Russia, and the United Arab Emirates, are harnessing Ethiopia's abundant hydroelectric resources to power their mining operations, contributing to the country's emergence as a key player in the global cryptocurrency industry.
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Conclusion
Ethiopia's rise in the Bitcoin space represents more than just an economic opportunity. Certainly, the country's natural advantages, including its cheap electricity and favorable climate, position this East African nation as a major player in global mining.
