Landlocked Nation Seeks to Harness Bitcoin Mining Potential
Located in the Horn of Africa, Ethiopia is a landlocked nation surrounded by six different neighbors. With an estimated population of approximately 120 million inhabitants, it ranks as the second most populous country on the continent. Furthermore, its GDP of $163 billion places it in the same economic league as Ukraine, Morocco, Slovakia, or Kuwait.
However, despite its growing economy and large population, Ethiopia has faced numerous challenges, including a bloody civil war that continues to this day. Several regions remain under the control of anti-government forces, such as the ethno-nationalist Amhara militia Fano. Nevertheless, this has not deterred Chinese bitcoin (BTC) mining company BIT Mining from expanding its operations into Ethiopia.
A New Opportunity for BIT Mining
BIT Mining, which was previously confined to Akron, Ohio, has signed a $14 million deal to acquire facilities worth 51 megawatts (MW) and nearly 18,000 bitcoin mining rigs in the country. According to Dr. Youwei Yang, chief economist at BIT Mining, Ethiopia’s ultra-low electricity costs offer the firm a unique opportunity to extend the shelf life of its bitcoin mining rigs.
"In the U.S., due to the industry’s extreme competitiveness, our machines tend to become obsolete after roughly two or two-and-a-half years of activity," Dr. Yang explained in an interview with CoinDesk. "The price of electricity is maybe 70% higher in Ohio than in Ethiopia, sometimes almost double. So it can only run very advanced ASICs, like the newest or second newest generations."
This presents a significant advantage for BIT Mining, as it allows them to move older generation machines to Ethiopia and still achieve high returns on investment. The company primarily operates mining facilities for clients, hosting various cryptocurrencies such as litecoin (LTC) and dogecoin (DOGE). However, state-of-the-art mining rigs are expensive, ranging from $5,000 to $10,000 per machine, making investors hesitant to send them to war-torn jurisdictions.
A Positive Feedback Loop
The plan is to install newer rigs in the U.S. and send out the aging machines to Ethiopia, creating a positive feedback loop. This allows investors to extract greater returns from their machines than if BIT Mining restricted itself to operating in the U.S. The increased returns attract more capital, which in turn enables the company to invest further in its operations.
"We can get at least two extra years by moving the rigs to Ethiopia," Dr. Yang said. "And then maybe after that, they’re completely done."
Why Ethiopia?
So why has BIT Mining chosen Ethiopia specifically for its expansion plans? One reason is that the country’s electric standard is similar to China’s, which allows the company to leverage the expertise of its engineering team and redeploy some of the electrical equipment previously used in the Middle Kingdom.
Ethiopia also boasts an abundance of hydroelectric power, thanks in part to Chinese investments totaling $8.5 billion across over 3,000 projects in recent years. For example, China helped fund the construction of the Grand Ethiopian Renaissance Dam (GERD), which will be the largest dam in Africa once completed and generate over 5,000 MW.
A Window of Opportunity
Not all of Ethiopia’s electric output has been put to use yet, creating a window of opportunity for bitcoin miners. The country is home to 1.5% of Bitcoin’s total hashrate, according to Hashrate Index, contributing about as much to the network as Norway.
Despite the challenges posed by its government’s shaky control over the territory, Ethiopia has been supportive of the mining industry. In fact, hundreds of thousands of Ethiopians were killed in the government’s war against the Tigray People’s Liberation Front between 2020 and 2022, and the state only just signed a peace treaty with the Oromo Liberation Army in December.
Overcoming Challenges
When asked about concerns over social unrest in the country, Dr. Yang replied that BIT Mining had been "studying, researching, and also visiting [Ethiopia] several times" to ensure stability. The decision was made to purchase a facility instead of building it from scratch to avoid any unforeseen trouble.
However, convincing employees to move to Ethiopia has proven challenging. In the meantime, the company is on the lookout for new investments in the country, including energy infrastructure projects, data centers for artificial intelligence (AI) purposes, or other bitcoin mining facilities.
"There’s plenty of opportunities in Ethiopia," Dr. Yang said. "The AI thing… We’ve 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] is very capital heavy."
Investing in Ethiopia
Dr. Yang noted that construction costs are significantly lower in Ethiopia compared to the U.S., making it an attractive location for pilot experiments or large-scale projects.
"It’s a lot easier to try one in Ethiopia," he said, "and we’re on the lookout for new investments in the country."
