Ethiopia has quickly emerged as a viable place for Bitcoin mining, utilizing its extensive hydro-power resources to entice Bitcoin miners from around the world.
As reported by Al Jazeera, the total cost of mining one Bitcoin is approximately $20,000, but other sources have placed the figure much lower.
For instance, Visual Capitalist reports it as $7,168.91 as of August 2022, due to very cheap electricity.
Whatever the actual number turns out to be, the combined factors of low energy costs and surplus hydro-power from Ethiopia’s Grand Ethiopian Renaissance Dam (GERD) have put Ethiopia in a very competitive position in the Bitcoin mining space internationally.
Abundant Hydropower and Inexpensive Electricity Drive Profitability
Ethiopia, on the other hand, charges electricity prices ranging from 3.2 to 4 cents per kilowatt hour, making it far cheaper to mine here than in countries like Canada, where electricity prices are between 15 and 20 cents per kilowatt hour.
Most mining farms are away from the city, operating outside Addis Ababa near substations, and utilizing surplus hydroelectric power. These farmers are operating thousands of servers that work on complex mathematical equations to earn bitcoin.
In these regards, there are incredibly favorable conditions for Ethiopian miners, especially with the price of bitcoin at around $114,000 per coin.
Since electricity makes up nearly 80% of a miner’s costs, Ethiopia is highly competitive based on its electricity costs alone.
Government Revenue and Energy Allocation Challenges
The Ethiopian government has seen a significant benefit from the spike in mining activity, with the state-owned power generation company estimating that Bitcoin miners gave it around $220 million in fees just in the past 12 months, according to officials.
Officials argue it is essential for us to continue developing revenues because it allows us to expand the grid and work towards the government’s goal of 100% access to electricity by 2030.
Critics are quick to point out a gaping contradiction: nearly half of Ethiopia’s population doesn’t have secure electricity supplies, so what possible justification is there for taking surplus energy and wasting it by using it for crypto mining instead of domestic use?
Authorities insist that miners are not being put ahead of local interests, claiming that Bitcoin mining is only a transitional use of excess capacity until the economy is in a place to allow everything is able to be utilized at the power supply.
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Ethiopia’s Future as a Crypto Mining Powerhouse
Surging Bitcoin prices and improving global sentiment towards digital assets put Ethiopia in a prime position to increase its prominence as a mining powerhouse.
The country has an enormous surplus of hydropower, which presents a unique and strategic advantage for attracting foreign investment and technical expertise.
However, it will be up to the government to balance the required short-term revenue from crypto mining against the sustainable provision of electricity to the millions of households and facilities requiring electricity.
Broader Context of Global Bitcoin Mining Shifts
Ethiopia’s growing position in Bitcoin mining is just one instance of a worldwide trend where many countries that have stranded or surplus energy consider cryptocurrency as a potential revenue stream.
Just last month, according to UnoCrypto, British companies Union Jack Oil and Reabold Resources proposed to mine Bitcoin using stranded natural gas in East Yorkshire, while pursuing their own revenue and improving the energy security of the UK.
Meanwhile, in the United States, CleanSpark recently announced the organization is disputing a $185 million tariff placed on its imported mining equipment, exposing the regulatory landscape that miners will need to continue expediting and leaning into their establishments within well-known markets.
These two examples showcase the evolution of a global landscape as countries and companies respond to and explore the intersection of energy and digital assets.
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