Ethiopia is a new frontier for Chinese Crypto
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Loading... - Juliet Tetteh
- 13 Sep 2024
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Ethiopia is rapidly emerging as a hotspot for Chinese cryptocurrency miners, who are being drawn to the country's abundant and inexpensive renewable electricity, as well as its favorable investment climate. Over a dozen Chinese crypto mining firms have signed electric supply deals with the national utility, Ethiopia Electric Power (EEP), which charges miners a fixed rate of 3.15 US cents per kilowatt-hour. This rate is comparable to that of the US state of Texas, which has become a top crypto mining center in the US.
Ethiopia's unique advantage lies in its stable power rates, which are not subject to significant fluctuations like those in Texas. The country boasts 5,200MW of installed power capacity, with 90% of it derived from hydropower. The remainder comes from wind and thermal sources. Additionally, the land-locked republic is nearing the completion of the Chinese-built Grand Ethiopian Renaissance Dam, which will contribute an additional 5,150MW of hydroelectricity to the grid.
The primary operating cost of a cryptocurrency mining facility is expenditure for electricity, which is used to power the machines and cool equipment to prevent overheating. Consequently, crypto mining firms are constantly seeking alternatives to acquire substantial amounts of power at the lowest possible cost. The Cambridge Bitcoin Electricity Consumption Index (CBECI) estimates that the global electricity usage associated with Bitcoin mining ranged from 67 TWh to 240 TWh in 2023.
The attraction for the Ethiopian government is that these mining companies pay for their electricity in US dollars, which is a valuable source of foreign currency for the country. Ethiopia has long faced a severe shortage of foreign currency, exacerbated by instability in the country. The 2022 peace agreement between Prime Minister Abiy Ahmed's government and the Tigray People's Liberation Front concluded a two-year civil war in the northern Tigray region, but conflicts persist among various groups in other areas.
Another reason why crypto miners are drawn to Ethiopia is its temperate climate, owing to its high altitude. Addis Ababa is situated 2,355 meters above sea level, which is advantageous for Bitcoin miners as it helps mitigate the substantial cooling costs associated with the high levels of heat generated by mining equipment. The ideal temperature range for cryptocurrency mining is 5°C to 25°C.
However, the arrival of the crypto mining industry in Ethiopia comes with risks. Several developing countries, such as Kazakhstan and Iran, initially welcomed Bitcoin mining, only to later oppose the sector when its energy consumption threatened to stir domestic grievances. At a time when less than 50% of the country has full access to electricity, the burden of crypto mining on the national grid could face eventual domestic resistance.
China's share of global Bitcoin mining fell dramatically after the imposition of the ban on cryptocurrency mining in 2021. Consequently, the US share of the crypto market has grown. As Ethiopia becomes a new frontier for Chinese cryptocurrency miners, it remains to be seen whether the country will be able to balance the benefits of this industry with the potential risks and challenges that come with it.
