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The Ethiopian government will partner with companies from China to establish a powerful new bitcoin mining infrastructure in the country, all centered around a massive hydroelectric dam.
On Thursday, February 14, actors involved with the project. Announced a partnership between Ethiopian Investment Holdings, a state-owned investment company, and Data Center Service PLC, a subsidiary of Hong Kong-based West Data Group. Kal Kassa, Ethiopia CEO of Hashlabs Mining, initially took to Twitter to state that “the partnership will target a $250 million data mining project in Ethiopia,” but later removed this announcement and replace with a similar ad that did not include an exact dollar amount. Regardless of the specific cash commitments involved, the goal of this partnership is clear: the establishment of a data center and other critical infrastructure to power bitcoin mining in Ethiopia.
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Since bitcoin mining has been largely banned in China, West Data Group has been actively working to start new operations abroad, in well-known mining hubs such as Kazakhstan and the United States, along with many other African nations. Chinese investment money has already been flowing to several African countries due to the Belt and Road Initiative, but Ethiopia has a couple of distinctive advantages that make it even more attractive: on the one hand, United BRICS (Brazil, Russia, India, China, South Africa) in January 2024, making it the newest member of this economic alliance of emerging nations. This additional diplomatic relationship will undoubtedly make massive international agreements develop much more easily.
The second biggest advantage in Ethiopia's favor is the Grand Ethiopian Renaissance Dam (GERD), a huge project build a dam on the Nile River to revolutionize power generation in Ethiopia. The dam has been under construction for more than a decade; It finally began filling with water in 2020 and has been generating hydroelectric power since 2022. But its current operations are only a fraction of its full potential, assuming the project is completed without problems. For these reasons, Chinese bitcoin miners have been tech/tech-trends/article/3251352/chinese-bitcoin-miners-are-flocking-ethiopia-attracted-cheap-energy-ideal-climate”>coming to Ethiopia in 2024, to the point that 19 of the 21 bitcoin mining companies that have reached agreements with Ethiopia's state power company are based in China. Several specific details of the dam have further sweetened the deal; Not only has a substantial amount of Chinese investment gone into the construction of the dam, but its altitude and consistent climate create conditions that are quite ideal for year-round mining operations. This is the current situation, but this important new infrastructure partnership has only just begun. One can only imagine how far it can go from here.
However, there are several concerns regarding the site's long-term viability as a global hotspot for bitcoin mining. Firstly, the GERD has been a highly contentious issue between Ethiopia and the Egyptian government. The Nile River has two main tributaries, the White Nile and the Blue Nile. Although the White Nile is one of the longest rivers in the world, it stretches more than 2,000 miles from Lake Victoria to where it meets its counterpart in Sudan, the much shorter Blue Nile, which flows from the Ethiopian highlands. , supplies about 85% of the water. once the two tributaries meet. The Egyptian government's long-standing concern is that the dam could cut off most of its country's water, unless Ethiopia is extremely scrupulous about not filling the dam too quickly. However, until the dam is full, it will only be able to generate a fraction of the projected energy goals.
The talks between the two governments have repeatedly broken below for the last few years and there is no agreement to formally resolve this dispute. However, the Ethiopian government has stated that they will continue construction and normal operations whether a deal is reached or not. United States has negotiated several of the talks between these two governments and are generally considered to favor Egypt's position; Considering the rivalry between the United States and China, there is no shortage of opportunities for either side to attempt to influence the dam's progress and operations.
Still, despite these potential setbacks, the GERD in its current state is substantially operational, and many bitcoin miners are already setting up shop. Reuters technology/ethiopia-set-up-large-data-centre-amid-reported-bitcoin-mining-surge-2024-02-16/”>reported that 90% of Ethiopia's electricity comes from hydroelectric sources, and that the completed dam will produce approximately as much electricity as the entire country generates today. Nuo Xu, founder of the Chinese Digital Mining Association, has tech/tech-trends/article/3251352/chinese-bitcoin-miners-are-flocking-ethiopia-attracted-cheap-energy-ideal-climate”>reclaimed that “Ethiopia will become one of the most popular destinations for Chinese miners” and is already arranging for representatives from other mining companies to visit the site.
As for the actual infrastructure that will be built from this multinational partnership, details have been particularly scarce, especially considering how Kal Kassa revised his claim to downplay the specific $250 million amount invested. Bloomberg states that most government discussions of the project use various euphemisms such as “high-performance computing” and “data mining” to refer to bitcoin mining, and that the project is officially designated as a data center. “Ethiopia is heavily regulated,” said Nemo Semret, CEO of Ethiopian miner QRB Labs, which is involved in pro-bitcoin lobbying efforts. “Introducing a new sector like this has been a big challenge and we have been working for the last two years to obtain all the necessary permissions from the government.” In other words, it seems like the government still has some sort of reluctance to directly support bitcoin and the industries that support it. However, his actions have been very supportive of bitcoin miners.
Although most of the mining and infrastructure construction in Ethiopia has been an entirely Chinese business, the project's enormous potential has already been recognized around the world. Marathon Digital, North America's Largest bitcoin Miner, Specifically Named bitcoin-miner-eyeing-africa-move”>attention To the place. Charlie Schumacher, vice president of corporate communications at Marathon, publicly stated that “we are looking at Africa. “We believe that bitcoin mining is, among other things, a technological solution for the energy sector, and Africa can be a great place to demonstrate this thesis.” He went on to add that “bitcoin miners can incentivize the construction of more energy across the continent, serving as the first customer for new energy projects.”
In other words, industry leaders around the world have identified this project as a powerful first step. Even if the Ethiopian government makes it difficult for Marathon or other American mining companies to buy this Chinese investment hub, there are countless opportunities to recreate the project. Today, many Ethiopians do not have access to electricity, and bitcoin mining is incentivizing electricity generation there with hundreds of millions of dollars. Is there a shortage of other places that would similarly benefit from such incentives? Of course not. bitcoin has the power to be an engine of progress around the world, driving electricity generation and job opportunities. And as an added bonus, everything is renewable. Is it any wonder that people around the world are looking to bitcoin as a new model for bringing economic independence everywhere?
