What to know:
- BIT Mining acquired 51 megawatts and 18,000 bitcoin mining rigs in Ethiopia in early December.
- The electricity costs in Ethiopia are so low that they allow the firm to reuse bitcoin mining rigs that would otherwise have become obsolete.
- Ethiopia is home to 1.5% of Bitcoin’s hashrate power.
Nestled among six distinct neighbors within the Horn of Africa, Ethiopia is home to about 120 million people, ranking it as the second most populous country on the continent. Economically, it holds a comparable position to countries such as Ukraine, Morocco, Slovakia, or Kuwait, with a GDP valued at $163 billion.
Nevertheless, the nation has endured a prolonged civil conflict, with certain territories remaining in the grip of opposition groups such as the ethno-nationalist Amhara militia known as Fano.
Despite not encountering any obstacles so far, Chinese Bitcoin (BTC) mining company BIT Mining (BTCM) has decided to broaden its operations beyond Akron, Ohio, by entering Ethiopia through a $14 million deal. This agreement includes the acquisition of facilities with a capacity of 51 megawatts (MW) and approximately 18,000 Bitcoin mining rigs in the country.
Indeed, Dr. Youwei Yang, BIT Mining’s chief economist, sees Ethiopia’s exceptionally low electricity prices as an exceptional chance for the company to prolong the useful life of its bitcoin mining equipment. Given the intense competition within the industry, these devices often become outdated in the U.S. after approximately two to two and a half years of operation, according to his statements.
In a conversation with CoinDesk, Yang stated that the cost of electricity in Ohio is approximately 70% more than in Ethiopia, sometimes even reaching twice as much. As such, only highly advanced ASICs (Application-Specific Integrated Circuits), like the latest or second latest generations, can operate there. However, now that we have this price difference, it’s possible to shift older generation machines to Ethiopia instead.
BIT Mining primarily functions as a hosting company, offering mining facilities to various clients beyond just litecoin (LTC) and dogecoin (DOGE) mining operations. Given that high-end mining equipment can cost anywhere from $5,000 to $10,000 per unit for retail buyers, it’s understandable that investors might be hesitant to send these expensive machines to potentially unstable regions.
The idea is to set up the modern mining equipment in the U.S. and ship the outdated ones to Ethiopia instead. This approach generates a self-reinforcing cycle, as investors can now reap higher profits from their machines compared to if BIT Mining only operated within the U.S. This increased potential profit attracts even more capital investment, according to Yang.
Yang suggested that we could potentially gain an additional two years if we relocate our rigs to Ethiopia. After this period, he implied, the rigs might be fully decommissioned.
Mining bitcoin in Ethiopia
One reason could be that Ethiopia was chosen because its electrical standards resemble those in China. This similarity enables BIT Mining to utilize their existing engineering knowledge and reuse some of the electric equipment they previously employed in China, prior to the bitcoin mining ban.
In addition to Ethiopia having a wealth of hydroelectric power, part of this is due to investments from China, amounting to approximately $8.5 billion spread across more than 3,000 projects over the past few years. One notable example is China’s contribution towards building the Grand Ethiopian Renaissance Dam (GERD). Upon its completion, it will be Africa’s largest dam and capable of generating over 5,000 Megawatts (MW) of electricity.
Although some of Ethiopia’s generated electricity remains unused, this gap presents an attractive prospect for bitcoin miners. The Ethiopian government has been encouraging towards the mining industry, making it a welcoming environment. Intriguingly, Ethiopia accounts for approximately 1.5% of Bitcoin’s total computational power, as reported by Hashrate Index, which is comparable to Norway’s contribution to the network.
As an analyst, I find myself compelled to acknowledge that the Ethiopian federal government’s control over its territories is tenuous, to say the least. Regrettably, this has led to a tragic sequence of events, as the government’s conflict with the Tigray People’s Liberation Front resulted in the loss of hundreds of thousands of lives between 2020 and 2022. Moreover, it was only recently, in December, that a peace treaty was finally signed with the Oromo Liberation Army – an adversary the government has been engaged with, in one form or another, since the 1970s.
When asked if BIT Mining had worries about the civil disturbances in the country, Yang responded by saying that the company had been “examining, investigating, and even traveling [to Ethiopia] on multiple occasions, to ensure it’s a reliable location.” The choice was made to acquire an existing facility rather than construct one from the ground up to prevent any potential unexpected issues, he explained.
Despite this, persuading BIT Mining staff to relocate from their homes in the U.S. and China to Ethiopia proved to be a difficult task, as stated by Yang.
As an analyst, I can confidently express that there’s a clear preference among individuals for residing and engaging in professional activities within wealthier and secure nations. Currently, one-third of our operational team hails from abroad, but over time, we anticipate our team to predominantly consist of local talent.
Currently, the business is actively seeking fresh investment opportunities within the nation. This could involve energy infrastructure ventures, establishing data centers for artificial intelligence (AI), or setting up more bitcoin mining operations.
Yang stated that Ethiopia presents numerous possibilities. Regarding artificial intelligence, they have been investigating this field for the past six to nine months. They possess the resources, manpower, and capability to execute it. However, the process requires substantial investment. Construction costs in the U.S. are significantly higher, making it challenging to conduct a trial run. On the other hand, implementing such an experiment in Ethiopia is more feasible due to lower costs.
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2025-01-07 18:31