Ethiopia, situated between six different neighbors in the Horn of Africa, has approximately 120 million inhabitants, making it the second most populous nation on the continent, and a GDP of $163 billion, placing it in the same economic league. than Ukraine, Morocco and Slovakia. or Kuwait.
However, the country has also suffered a bloody civil war, with several regions still under the control of anti-government forces, such as the Amhara ethno-nationalist militia Fano.
But that hasn’t stopped Chinese bitcoin (BTC) mining company BIT Mining (BTCM) from expanding its operations (until now limited to Akron, Ohio) to Ethiopia by signing a $14 million deal to acquire facilities worth of 51 megawatts (MW) and almost 18,000 bitcoin mining platforms in the country.
In fact, for Dr. Youwei Yang, chief economist at BIT Mining, the ultra-low costs of electricity in Ethiopia provide the company with a unique opportunity to extend the life of its bitcoin mining rigs which, due to extreme competitiveness of the industry, tend to become obsolete in the United States after about two to two and a half years of activity, he said.
“The price of electricity is maybe 70% higher in Ohio than in Ethiopia, sometimes almost double, so you can only run very advanced ASICs, like the newest generation or the second newest,” Yang told CoinDesk in an interview. “We can now move older generation machines to Ethiopia.”
It’s a big deal, because in addition to mining litecoin (LTC) and dogecoin (DOGE), BIT Mining is primarily in the hosting business, meaning it operates mining facilities for various clients. State-of-the-art mining rigs are not cheap (a single machine can cost between $5,000 and $10,000 for retail buyers) and investors are naturally reluctant to ship such expensive pieces of machinery to war-torn jurisdictions.
The argument, then, is to install the newer platforms in the United States and send the older ones to Ethiopia. That creates a positive feedback loop, because now investors can extract higher returns from their machines than if BIT Mining were limited to operating in the U.S. That, in turn, attracts more capital, Yang said.
“We can get at least two more years by moving the rigs to Ethiopia, and then maybe after that, they will be completely finished,” Yang said.
Bitcoin mining in Ethiopia
But why specifically Ethiopia? For one thing, the country’s electrical standard is similar to China’s, allowing BIT Mining to leverage the expertise of its engineering team and redeploy some of the electrical equipment it previously used in the Middle Kingdom before the mining ban. of bitcoins.
Ethiopia also enjoys an abundance of hydropower, thanks in part to Chinese investments, which have totaled $8.5 billion in more than 3,000 projects in recent years. For example, China helped finance the construction of the Grand Ethiopian Renaissance Dam (GERD); Once completed, it will be the largest dam in Africa and will generate more than 5,000 MW.
However, not all of Ethiopia’s electricity production has yet been used, and that has created a window of opportunity for bitcoin miners, especially as the Ethiopian government has supported the mining industry. In fact, the country is home to 1.5% of the total Bitcoin hashrate, according to Hashrate Index, meaning it contributes as much to the network as Norway.
This is despite the fact that the Ethiopian federal government has unstable control over the entire territory of the country. Hundreds of thousands of Ethiopians died in the government’s war against the Tigray People’s Liberation Front between 2020 and 2022, and the state just signed a peace treaty in December with the Oromo Liberation Army, which it had been fighting against. one form or another since the 1970s.
When asked if BIT Mining was concerned about social unrest in the country, Yang responded that the company had been “studying, researching and also visiting [Ethiopia] several times, alone [ascertain] which is a stable place.” The decision was made to purchase a facility rather than build it from scratch to avoid unforeseen problems, he said.
Still, it was a challenge to convince BIT Mining employees to move to Ethiopia from their previous addresses in the United States or China, Yang said.
“Obviously people like to live and work in richer, safer countries,” he said. While one-third of the facility’s operational team is foreign at the moment, the team will be composed primarily of locals in the future, he said.
Meanwhile, the company is looking for new investments in the country, whether it be energy infrastructure projects, data centers for artificial intelligence (AI) purposes or other bitcoin mining facilities.
“There are many opportunities in Ethiopia,” Yang said. “The AI thing… we have been studying it for the last six to nine months. We have the power. We have the people. We have the ability to do it. But [the whole process] It is very capital heavy. Construction in the United States is much more expensive, so it is very difficult to do a pilot experiment, but it is much easier [try one] in Ethiopia.”
