Chinese partnership to bring large-scale Bitcoin mining to Ethiopia

The following is an excerpt from the latest edition of Bitcoin Magazine Pro, Bitcoin Magazine’s premium markets newsletter. To be the first to get these insights and other on-chain Bitcoin market analysis delivered to your inbox, Subscribe now.

The Ethiopian government is planning to partner with a Chinese company to build a powerful new Bitcoin mining infrastructure in the country, centered around a large hydroelectric dam.

On Thursday, February 14, officials involved in the project announced a partnership between Ethiopian Investment Holdings, a state-owned investment company, and Data Center Service PLC, a subsidiary of Hong Kong-based West Data Group. Kal Kassa, Hashlabs Mining’s Ethiopian CEO, initially claimed on Twitter that “this partnership will be aimed at a $250 million data mining project in Ethiopia,” but later deleted the announcement. change There was a similar announcement that didn’t include the exact amount. Regardless of the specific cash commitments involved, the goals of this partnership are clear. That means building data centers and other critical infrastructure to power Bitcoin mining in Ethiopia.

Bitcoin Magazine Pro™ is a reader-supported publication. To receive new posts and support my work, please consider becoming a free or paid subscriber.

Since Bitcoin mining is largely banned in China, West Data Group has been actively seeking to launch new operations abroad in familiar mining hubs such as Kazakhstan and the United States, along with several other African countries. Chinese investments are already flowing into various countries in Africa due to the Belt and Road Initiative, but Ethiopia has some distinct advantages that make it even more attractive. First, BRICS (Brazil, Russia, India, China, and South Africa) became the newest member of the economic alliance of emerging economies in January 2024. These added diplomatic ties will undoubtedly make large-scale international transactions run much more smoothly.

The second biggest draw in Ethiopia’s favor is the Grand Ethiopian Renaissance Dam (GERD), a massive project to build a dam on the Nile River to revolutionize Ethiopia’s energy development. The dam was built more than 10 years ago. It finally began filling with water in 2020, and hydroelectric power generation began in 2022. However, assuming the project is completed smoothly, current operations are only a fraction of their full potential. For this reason, Chinese Bitcoin miners are flocking to Ethiopia in 2024, and 19 of the 21 Bitcoin mining companies that have signed an agreement with Ethiopia’s state-run power company are headquartered in China. A few details about the dam sweetened the deal. Not only has a significant amount of Chinese investment already gone into the dam’s construction, but the altitude and consistent climate create ideal conditions for year-round mining operations. Although this is the situation today, this important new infrastructure partnership is just beginning. You can imagine how far you can go from here.

Nonetheless, there are some concerns about the site’s long-term viability as a global hotspot for Bitcoin mining. First of all, GERD has been a hotly debated issue between the Ethiopian and Egyptian governments. The Nile River has two major tributaries: the White Nile and the Blue Nile. The White Nile is one of the world’s longest rivers, stretching more than 2,000 miles from Lake Victoria to its confluence with the river in Sudan, but the much shorter Blue Nile, which flows in the Ethiopian highlands, supplies about 85% of its water. When two tributaries meet. The Egyptian government’s long-standing concern is that unless Ethiopia is extremely careful, including not filling the dam too quickly, the dam could cut off much of the country’s water. However, until the dam is full, it can only generate a fraction of the expected energy target.

Talks between the two governments have repeatedly broken down over the past few years, and no agreement has yet been reached to formally resolve the dispute. Nevertheless, the Ethiopian government stated that it would proceed with normal construction and operations regardless of whether there was an agreement or not. The United States has brokered several talks between these two governments and is generally seen as favoring Egypt’s position. Given the rivalry between the United States and China, there is no shortage of opportunities for either side to influence the progress and operation of the dam.

However, despite these possible difficulties, GERD in its current state is practically operational and many Bitcoin miners have already set up shop. Reuters It has been reported that 90% of Ethiopia’s electricity comes from hydroelectric power, and that the completed dam will produce as much electricity as the entire country currently produces. “Ethiopia will become one of the most popular destinations for Chinese miners,” claimed Nuo Xu, founder of the China Digital Mining Association, and is already arranging for representatives from other mining companies to visit the site. .

Details regarding the actual infrastructure that will be built through this multinational partnership are scarce, especially considering how Kal Kassa has since revised his claims to downplay the specific amount of $250 million invested. bloomberg Most government discussions of the project use various euphemisms such as “high-performance computing” and “data mining” to refer to Bitcoin mining, and claim that the project has been officially designated a data center. “Ethiopia is very regulated,” argued Nemo Semret, CEO of QRB Labs, an Ethiopian miner involved in lobbying for Bitcoin. “Introducing a new sector like this has been a huge challenge. We have been working for the past two years to get all the necessary permissions from the government.” That said, the government still seems to have some sort of squeamishness about directly supporting Bitcoin and the industries that support it. Nonetheless, the action helped Bitcoin miners a lot.

Although most of Ethiopia’s mining and infrastructure construction has been entirely Chinese business deals, the enormous potential of these projects is already being recognized globally. Marathon Digital, North America’s largest Bitcoin miner, has particularly sparked interest in the site. Charlie Schumacher, Marathon’s Vice President of Corporate Communications, stated publicly: “We are looking at Africa. We believe that Bitcoin mining is first and foremost a technological solution for the energy sector, and Africa could be a great place to prove this thesis.” He continued, “Bitcoin miners can encourage the deployment of more power across the continent by serving as the first customers for new power projects.”

This means that industry leaders around the world have recognized this project as a strong first step. Even if the Ethiopian government makes it difficult for Marathon or other U.S. mining companies to invest in this Chinese investment hub, there are countless opportunities to reinvent the project. Today, many Ethiopians do not have access to electricity, and Bitcoin mining is encouraging hundreds of millions of dollars in electricity generation. Are there a lack of other regions that could similarly benefit from such incentives? Of course not. Bitcoin has the power to power development around the world, boosting electricity generation and job opportunities. As an added benefit, it’s all playable. Is it any wonder that people around the world are seeing Bitcoin as a new model that will bring economic independence everywhere?