"Chinese bitcoin miners find a new crypto haven in Ethiopia"

" Chinese bitcoin miners find a new crypto haven in Ethiopia \r\n\r\nLast spring, cargo containers began appearing near electricity substations connected to the recently built Grand Ethiopian Renaissance Dam, Africa\u2019s largest. Inside were stacks of powerful, energy-guzzling computers.\r\n\r\nIt was a telltale sign that Chinese Bitcoin miners, having bounced from country to country in search of cheap power and benign regulations since Beijing cast them out two years before, had arrived in the Horn of Africa.\r\n\r\nBuffeted by political and economic headwinds, they were lured by some of the world\u2019s lowest electricity costs \u2014 as well as an increasingly friendly government. Ethiopia, which allowed Bitcoin mining starting in 2022 even though it still bans cryptocurrency trading, has bolstered ties with China over the past decade, and several Chinese companies helped build the $4.8 billion dam the miners plan to draw their power from.\r\n\r\nEthiopia has emerged as a rare opportunity for all firms that mine the original cryptocurrency, as climate change and power scarcity fuel a backlash against the $16 billion-a-year industry (at Bitcoin\u2019s current price) elsewhere. But it holds special appeal for Chinese companies, which once dominated Bitcoin mining but have struggled to compete with local rivals in Texas, the current hub.\r\n\r\nIt is also a risky gamble, for the companies and Ethiopia alike. A succession of developing countries like Kazakhstan and Iran initially embraced Bitcoin mining, only to turn on the sector when its energy use threatened to fuel domestic discontent. China\u2019s reign as the epicenter of Bitcoin mining came to an abrupt end in 2021, when the government banned it. Dozens of companies were forced to leave.\r\n\r\n\u201cFirstly, countries can run out of available electricity, leaving no room for miners to expand,\u201d said Jaran Mellerud, chief executive of Hashlabs Mining. \u201cSecondly, miners can suddenly be deemed unwelcome by the government and be forced to pack up and leave.\u201d\r\n\r\nEthiopian officials are wary of the controversy that accompanies Bitcoin mining, according to industry executives who spoke on condition of anonymity to avoid jeopardizing government relations. Even after new generation capacity came online, almost half the population live without access to electricity, making mining a delicate topic. At the same time, it represents a potentially lucrative source of foreign-exchange earnings.\r\n\r\nEthiopia has already risen to become one of the world\u2019s top recipients of Bitcoin mining machines, according to an estimate from mining services provider Luxor Technology. That\u2019s even as Luxor\u2019s first major deals to ship equipment there came in September, said Chief Operations Officer Ethan Vera.\r\n\r\nThe state power monopoly says it has struck power supply deals with 21 Bitcoin miners. All but two of them are Chinese.\r\n\r\n\u201cEthiopia will become one of the most popular destinations for Chinese miners,\u201d said Nuo Xu, founder of China Digital Mining Association, which organizes exhibitions and facilitates trading in mining machines. He\u2019s arranging a trip to Ethiopia for a group of Chinese mining executives to tour potential sites.\r\n\r\nThat Bitcoin miners are willing to ship equipment worth tens of millions of dollars to a country that just two years ago emerged from a civil war in its north is a testament to the fraught political and economic environment in which they exist.\r\n\r\nThe companies play a crucial role maintaining the Bitcoin network by using powerful computers (or \u201crigs\u201d in industry argot) to solve mathematical puzzles and validate encrypted transactions on the blockchain. In return, they receive rewards in Bitcoin released from the network.\r\n\r\nIt\u2019s a volatile business, with revenues tracking the token\u2019s rise and fall. Miner Core Scientific Inc. plunged into bankruptcy in December 2022 as cryptocurrency markets crashed; 13 months later it won court approval to exit Chapter 11 after the price of Bitcoin jumped almost 150%.\r\n\r\nRead more: Crypto Miner Core Scientific to Leave Bankruptcy as Coins Rally\r\n\r\nThe rigs use vast amounts of power, so access to cheap electricity is a critical competitive advantage. Bitcoin mining consumed 121 terawatt-hours of power in 2023, the Cambridge Centre for Alternative Finance estimates \u2014 similar to Argentina\u2019s use. Electricity can account for as much as 80% of miners\u2019 operating costs, according to Mellerud.\r\n\r\nThis explains why low-cost power has largely dictated where miners put much of their equipment in the past few years: First in China, then in places like Iran, Kazakhstan, Russia and northern Sweden, and most recently Texas. What those places have in common is relatively cheap energy.\r\n\r\nThe reliance on abundant power is also a major vulnerability because it can put miners in competition for electricity with factories and households, exposing them to political backlash.\r\n\r\nWhen Kazakzstan imposed fresh curbs and taxes on miners, \u201cit basically killed the industry,\u201d said Hashlabs co-founder Alen Makhmetov. Two years after the clampdown, his 10-megawatt facility there is still sitting idle.\r\n\r\nAnd in an era when rising temperatures wreak havoc around the world, Bitcoin mining is increasingly seen as a contributor to global warming that doesn\u2019t serve any productive purpose \u2014 even though miners have claimed they\u2019re increasingly tapping clean energy. A study by United Nations University published in October estimated that two-thirds of the electricity used for Bitcoin mining in 2020 and 2021 was generated using fossil fuels.\r\n\r\nThe Ethiopian government permitted Bitcoin mining mainly because the companies pay in foreign currency for the electricity they consume, Yodahe A. Zemichael, deputy director at the Information Network Security Administration, said in a response to questions from Bloomberg News. In the written reply, he used terms like \u201chigh-performance computing\u201d and \u201cdata mining\u201d instead of Bitcoin mining.\r\n\r\n\u201cEthiopia is heavily regulated,\u201d said Nemo Semret, CEO of local miner QRB Labs, who helped lobby officials to permit Bitcoin mining. \u201cIntroducing a new sector like this has been a big challenge, and we\u2019ve been working for the last two years to get all the necessary permissions from the government.\u201d\r\n\r\nThe government has adopted a directive to regulate \u201ccryptographic products\u201d including mining, according to Yodahe. He added that issuing licenses \u201cis being done in a sandbox and it\u2019s in an early stage,\u201d declining to say how many permits have been granted so far.\r\n\r\nSemret said uncertainty persists among miners about how authorities will oversee them longer term, and Yodahe declined to say whether the directive has been shared with industry participants.\r\n\r\nYet for Bitcoin miners \u2014 especially Chinese ones \u2014 Ethiopia represents a unique blend of economic and political advantages. Some executives even speak of it as a possible rival to Texas, which represents as much as a quarter of the global capacity to create Bitcoin.\r\n\r\n Ideal Climate Conditions \r\n\r\nThe African country\u2019s capacity to supply electricity for creating Bitcoin may rival that of Texas in a few years, according to a senior executive at Bitmain, the Beijing-based firm that\u2019s the dominant supplier of rigs. The opening of the GERD project increased Ethiopia\u2019s installed generation capacity to 5.3 gigawatt, 92% of which comes from hydropower, a renewable energy source.\r\n\r\nOnce GERD is fully completed, Ethiopia\u2019s generation capacity will double, according to Ethiopian Electric Power. It charges Bitcoin miners a fixed rate of 3.14 US cents per kilowatt hour for electricity drawn from substations, Marketing and Business Development Director Hiwot Eshetu said in an interview.\r\n\r\nWhile that\u2019s similar to the average in Texas, rates in the Lone Star State can swing wildly, Luxor\u2019s Vera said, making profits there less predictable. In Ethiopia, the price will fall once miners connect directly to power plants, according to Hiwot. He added that EEP has paused signing new contracts \u201cto ensure a well-controlled and managed process.\u201d\r\n\r\nBWP, which hosts machines operated by miners from China and other countries, started shipping equipment to Ethiopia early last year. In December, the company announced on X that it was opening a 120-megawatt data center for mining equipment \u2014 sizable even by Texas standards \u2014 in Addis Ababa, the capital.\r\n\r\nCEO Vitaliy Borshenko said Ethiopia\u2019s advantages go beyond cheap, renewable power.\r\n\r\n\u201cThe ideal temperature for the miners is 5 to 25 degrees\u201d Celsius (41F-77F), he said, citing recommendations from rig maker Bitmain. \u201cThat is right in the average range of temperature in Ethiopia.\u201d Addis Ababa is almost 2,400 meters above sea level, far higher than most Alpine ski-resort towns.\r\n\r\nSuch is the lure that some Chinese firms aren\u2019t waiting for an official green-light before starting operations, said Xu of the China Digital Mining Association. \u201cMiners present themselves as factories or agriculture companies\u201d to get electricity rather than seek government approval to create Bitcoin, he said without naming them. Yodahe didn\u2019t respond to a request for comment on such practices.\r\n\r\nTheir confidence is underpinned by geopolitics. China is the biggest source of foreign direct investment in Ethiopia as well as its top bilateral creditor. The Chinese government and financial institutions lent almost $15 billion for 70 \u201cmega projects\u201d in the African nation from 2006 to 2018, Ethiopia\u2019s finance ministry said in December.\r\n\r\nEthiopia was one of 17 nations China upgraded ties with last year as President Xi Jinping wooed partners from the Global South. In October, Xi hosted Ethiopian Prime Minister Abiy Ahmed in Beijing as the two countries elevated their relations to an \u201call-weather strategic partnership,\u201d according to the official Xinhua news agency.\r\n\r\nThe Horn of Africa country desperately needs foreign-currency inflows. It is in negotiations for a bailout from the International Monetary Fund after defaulting on an interest payment to private creditors in December. The month before, it reached an agreement with bilateral creditors to suspend payments.\r\n\r\nEncouraged by China\u2019s rising stature in Africa, Chinese Bitcoin miners are also starting to look at countries like Angola and Nigeria, said Xu.\r\n\r\n\u201cThe Chinese miners don\u2019t have any problems building sites in Africa,\u201d he said. \u201cIt is like another Chinese province.\u201d"

"Chinese bitcoin miners find a new crypto haven in Ethiopia"

Shell to exit South Africa’s downstream businessesAMP

16% of Nigerians to face severe food insecurity between June and August 2024AMP

Nigeria may re-introduce telecom tax to obtain new $750 million World Bank loanAMP

UCL: PSG and Dortmund square off for a place in the finals AMP

Legon Sports Stadium to host 2023/24 MTN FA Cup finalAMP

Moody’s analysts pick out 10 big risks facing insurance industryAMP

Binance suggests Bribe sought to make Nigeria problems ‘go away’AMP

Cristiano Ronaldo’s 2018 famous bicycle kick goal ranked the most-viewed Champions League goal, new study reveals AMP

SIMS urges SMEs to embrace budgeting for successAMP

Shell to exit South Africa’s downstream businessesAMP

16% of Nigerians to face severe food insecurity between June and August 2024AMP

Nigeria may re-introduce telecom tax to obtain new $750 million World Bank loanAMP

UCL: PSG and Dortmund square off for a place in the finals AMP

Legon Sports Stadium to host 2023/24 MTN FA Cup finalAMP