Last week, on Thursday, February 15, the Ethiopian Government’s investment arm, Ethiopian Investment Holdings (EIH), signed a memorandum of understanding with Hong-Kong-based West Data Group’s Center Service PLC to commence mining bitcoin.
The partnership is under a general agreement for a groundbreaking $250 million data mining project “that is dedicated to establishing cutting-edge infrastructure for data mining and artificial intelligence training operations in Ethiopia,” according to the EIH. Ethiopia is positioning itself as a leader in the data centre space in Africa, which is estimated to grow to $5.4 billion by 2027, according to Aritzon Advisory and Intelligence.
As noted by Kal Kassa, CEO for Ethiopia at Hashlabs Mining, “the development is part of the Ethiopian Government’s aim to drive economic growth by leveraging technology and energy sources to attract foreign investments.”
The EIH has yet to confirm the details of its bitcoin mining operations or respond to requests for comment by other publications. Nevertheless, as the project matures, we can expect to get more clarity from them on the particulars of the arrangement.
Bitcoin Mining In Ethiopia
Despite the ban on crypto trading in the country, 2022 saw the ratification of favorable data mining laws that permit “high-performance computing” and “data mining,” which is where bitcoin mining falls under. In the last two years, this has opened the floodgates to miners seeking its comparatively positive reception to bitcoin mining, coupled with its abundance of energy sources—chiefly hydro—to its optimal weather and cheap energy costs.
According to data from Bitcoin mining services company Luxor Technologies, in 2023, Ethiopia ranked fourth behind the USA, Hong Kong, and Asia as one of the top destinations for Bitcoin mining rigs. Russian bitcoin mining company Bitcluster has already built the first 120 MW bitcoin mining facility, and companies such as Hashlabs Mining have started building bitcoin mines in Ethiopia for their global clients.
In a few years, according to a forecast by a senior executive at Bitmain and reported by Bloomberg, Ethiopia’s energy potential could rival Texas’s generation capacity, which currently accounts for an astounding 28.5% of the US’s 40% global hash rate.
Nevertheless, bitcoin miners are cautious about the future of regulation in the country. As other regions have shown, bitcoin mining has no permanent regulatory cushion. It is also too early to predict whether Ethiopia will switch its stance on bitcoin mining as Iran and Kazakhstan did when it started competing with domestic energy demand.
Regardless, the government is keen on expanding its inflow of foreign currency to mitigate its economic challenges and views mining as a compelling investment opportunity to realise that goal.
The Future Of Nation State Mining In Africa
With the energy infrastructure yet to match demand on the ground for electricity in several African countries, using bitcoin mining has continued to become an attractive avenue to bring electricity to millions.
In Ethiopia, for example, over 40% of its population, roughly 120 million people, are without electricity. Yet, the country has an installed capacity generation of over 5,000 MW and anticipates a projected additional install capacity generation of ~5,150 MW following the completion of the Grand Ethiopia Renaissance Dam (GERD), the largest hydroelectric project in Africa.
Following the examples of mining projects elsewhere in Africa, such as Gridless and Trojan Mining, Ethiopia too can leverage its abundant excess green energy to provide electricity to its citizens via bitcoin mining. It can serve as a blueprint for other African countries with comparable energy sources to follow and navigate similar economic problems.
Further, the inclusion of bitcoin mining into the Ethiopian economy could contribute $2 – $4 billion to its GDP, according to data from Project Mano, an open collective seeking to educate the government on the potential benefits of bitcoin to the country’s economy.
The economic benefits of Ethiopia strategically leveraging its abundant energy resources for Bitcoin mining are vast and far-reaching. It is only a matter of time before other African nations join the bandwagon.
Bitcoin mining will ultimately be a pivotal tool in addressing the economic challenges of various African countries.