Grace Ashiru
Last Thursday, February 15, Ethiopian Investment Holdings (EIH), the investment arm of the Ethiopian Government, signed a memorandum of understanding with Hong Kong-based West Data Group’s Center Service PLC to initiate bitcoin mining operations.
The collaboration is governed by a comprehensive agreement for a significant $250 million data mining initiative “aimed at establishing state-of-the-art infrastructure for data mining and artificial intelligence training operations in Ethiopia,” as stated by the EIH. Ethiopia is strategically positioning itself as a frontrunner in the data center sector in Africa, which is projected to reach $5.4 billion by 2027, according to Aritzon Advisory and Intelligence.
According to Kal Kassa, CEO for Ethiopia at Hashlabs Mining, the development is aligned with the Ethiopian Government’s goal of boosting economic growth through the strategic use of technology and energy resources to attract foreign investments.
The EIH has not confirmed the specifics of its bitcoin mining operations or provided any comments to other publications. However, as the project develops, we anticipate receiving more detailed information from them regarding the arrangement.
Bitcoin Mining Ventures Emerge in Ethiopia
In 2022, despite the ban on crypto trading in the country, there was a significant development with the ratification of favorable data mining laws allowing for “high-performance computing” and “data mining,” encompassing bitcoin mining. This shift has attracted a surge of miners due to the comparatively positive reception towards bitcoin mining, abundant hydro-based energy sources, optimal weather conditions, and cost-efficient energy.
In 2023, Ethiopia emerged as the fourth leading destination for Bitcoin mining rigs, trailing only the USA, Hong Kong, and Asia, as reported by Bitcoin mining services company Luxor Technologies. The country has witnessed significant developments in this sector, with Russian company Bitcluster establishing a 120 MW bitcoin mining facility and Hashlabs Mining commencing the construction of bitcoin mines to cater to global clients.
According to a forecast by a senior executive at Bitmain and reported by Bloomberg, Ethiopia’s energy potential could soon rival Texas’s generation capacity. Currently, Texas accounts for an impressive 28.5% of the US’s 40% global hash rate.
However, bitcoin miners are expressing caution regarding the future of regulation in the country. As demonstrated in other regions, bitcoin mining is not immune to changing regulatory landscapes. It is still premature to anticipate whether Ethiopia will follow the lead of Iran and Kazakhstan, altering its stance on bitcoin mining as they did when faced with competition from domestic energy demand.
In any case, the government is committed to increasing its foreign currency reserves to address its economic challenges. It sees mining as a promising investment opportunity to achieve this objective.
The Prospects of Nation-State Mining in Africa
With the energy infrastructure still struggling to meet the demand for electricity in many African countries, bitcoin mining has emerged as an appealing solution to provide power to millions.
In Ethiopia, more than 40% of its population, approximately 120 million people, lack access to electricity. However, the country boasts an installed capacity generation of over 5,000 MW, with plans for an additional capacity generation of approximately 5,150 MW upon the completion of the Grand Ethiopian Renaissance Dam (GERD), the largest hydroelectric project in Africa.
Drawing inspiration from successful mining projects in Africa like Gridless and Trojan Mining, Ethiopia has the opportunity to harness its surplus green energy to power bitcoin mining operations and provide electricity to its citizens. This pioneering initiative could set a precedent for other African nations with similar energy resources, offering a viable solution to common economic challenges.
Moreover, integrating bitcoin mining into the Ethiopian economy has the potential to contribute $2 to $4 billion to its GDP, as per data from Project Mano. This open collective aims to educate the government on the economic benefits of bitcoin for the country.
Ethiopia stands to gain immense economic advantages by strategically harnessing its abundant energy resources for Bitcoin mining. It’s only a matter of time before other African nations follow suit, tapping into this lucrative opportunity.
Bitcoin mining has the potential to significantly contribute to addressing the economic challenges faced by several African countries.
