Bloomberg learned about the relocation of Chinese miners to Ethiopia


btc_china-min
btc_china-min

Chinese miners increasingly choose Ethiopia as the next hub for expanding their activities after Iran and Kazakhstan. He writes about it Bloomberg.

The African country has banned trading in cryptocurrencies, but has approved their mining since 2022.

According to the publication, 19 out of 21 companies that have concluded agreements with the state energy monopoly Ethiopian Electric Power (EEP) are recognized as Chinese.

After the fact forbidden in May 2021, a significant part of the mining business in China will have to move abroad. Africa and, in particular, Ethiopia is one of the destinations for relocation of activities.

Attractive conditions for organizing mining

The country attracts cheap electricity, 92% of which is produced by hydropower. After the construction of the Grand Ethiopian Renaissance Dam (GERD) facility with Chinese investment in the amount of $4.8 billion, generation reached 5.3 GW.

According to Bitmain, the manufacturer of ASIC miners, the opening of GERD gives Ethiopia the opportunity to become a competitor of Texas in the coming years as a supplier of electricity for bitcoin mining. The share of the American state in the global hash rate of the first cryptocurrency is estimated at 25%.

According to the EEP, the fixed tariff for industry participants in the African country is $0.0314 per kWh. Luxor COO Ethan Vera confirmed that this is comparable to the price of electricity in Texas, but there it can fluctuate greatly due to seasonal demand.

According to the EEP representative, the tariff for miners will decrease even more after the full launch of GERD. He added that the state company suspended the conclusion of new contracts with cryptocurrency miners “to ensure a well-controlled and managed process.”

According to Jaran Mellerud, CEO of Hashlabs Mining, the payment of electricity can reach up to 80% of the total cost of cryptocurrency mining.

The head of BitCluster, Vitaliy Borshchenko, drew attention to another attractive factor for mining in Ethiopia – the climate. According to the recommendations of Bitmain, the ideal temperature for the operation of installations is from 5°C to 25°C. This corresponds to the conditions of the capital Addis Ababa, which is located at an altitude of almost 2400 m.

The company has already opened a mining mine in the country data center with a capacity of 120 MW.

Luxor noted that Ethiopia has recently become one of the world’s main importers of bitcoin mining equipment.

Risks of mining business in developing countries

One of the main reasons why the government allowed mining was the fact that industry participants pay for electricity in foreign currency, admitted Deputy Director of the Network Information Security Administration Yodakh Zemychel. However, in response, he preferred to use the terms “high-performance computing” and “data collection” to describe cryptocurrency mining.

“Ethiopia is very highly regulated. Promoting a new sector like this was a difficult task. We have been working for the past two years to get all the necessary government approvals,” said Nemo Semret, CEO of QRB Labs.

The local mining company acted as a lobbyist for the industry in the bureaucratic environment.

Zemychel explained that the government has adopted a directive to regulate “encryption products”, including mining. He added that the issuance of licenses “occurs in a sandbox and is at an early stage.” The approved official refused to name the number of issued.

Semret noted that miners still have uncertainty about how the authorities will carry out supervision in the long term.

Ethiopian officials, speaking on condition of anonymity, admitted to Bloomberg that there are concerns about the impact of mining development on internal stability. The energy-intensive industry has to expand in a country where less than 50% of the population has access to electricity.

After the ban in China, Kazakhstan became one of the main destinations for the migration of local miners. Interest in jurisdiction continued to grow even after introduction additional fee for electricity.

However, as a result, the country faced an energy deficit and a need limit activity bitcoin miners. Miners began to leave jurisdiction due to problems with data center power supply. Speeded up the process restrictions for industry and tightening regulation.

For the most part, this “killed” the industry in the country, believes Hashlabs co-founder Alen Makhmetov. The company’s enterprise in Kazakhstan with a capacity of 10 MW has been idle for two years.

Earlier, Chinese miners paid attention to Iran as a jurisdiction with cheap electricity. After power outagespresumably caused by bitcoin mining, in 2021 the authorities banned their work for several months. Restrictions were introduced and in the future.

Mellerud noted the risks of expanding business in developing countries:

“Firstly, the available electricity may run out, leaving no room for expansion. Secondly, miners can suddenly stop being greeted by the authorities, which will lead to the need to gather and leave.”

According to Bloomberg, the confidence of Chinese miners in Ethiopia is fueled by geopolitics. From 2016 to 2018, Beijing invested almost $15 billion in 70 “mega-projects” in the country. The states maintain close relations at the highest political level. At the same time, Ethiopia is in dire need of an inflow of foreign currency to pay off debts.

For the same reasons, miners from China are also looking closely at other jurisdictions on the continent, such as Nigeria and Angola, noted the head of the China Digital Mining Association, Nuo Xu. The organization helps them relocate their business abroad.

“Chinese miners have no problems with building enterprises in Africa. It’s like another province of their country,” Xu concluded.

Let us remind you, mass media found outhow China continues to generate up to 20% of Bitcoin’s hashrate after banning mining.

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