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The Ethiopian government is set to partner with companies from China to create a powerful new Bitcoin mining infrastructure in the country, all centered around a massive hydroelectric dam.
On Thursday, February 14, the actors involved in the project announced a partnership between Ethiopian Investment Holding Company, a state-owned investment company, and Data Center Service PLC, a subsidiary of West Data Group, headquartered in Hong Kong. Kal Kassa, CEO of Ethiopia at Hashlabs Mining, initially took to Twitter to claim that “the partnership will be for the purposes of a $250 million data mining project in Ethiopia,” but he later deleted that announcement and replace With a similar ad that did not include a specific dollar amount. Regardless of the specific monetary commitments involved, the goal of this partnership is clear: to create a data center and other critical infrastructure to boost Bitcoin mining in Ethiopia.
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Since Bitcoin mining is largely banned in China, West Data Group is actively working to start new operations abroad, in familiar mining hubs such as Kazakhstan and the United States along with several other African countries. Chinese investment money has already flowed to various countries in Africa due to the Belt and Road Initiative, but Ethiopia has two distinct advantages that make it more attractive: on the one hand, it has joined the BRICS group (Brazil, Russia, India, China, and Russia). South Africa) in January 2024, making it the newest member of this economic alliance of emerging nations. There is no doubt that this additional diplomatic relationship will make huge international deals go through more smoothly.
The second biggest advantage in Ethiopia's favor is the Grand Ethiopian Renaissance Dam, a massive project to build a dam on the Nile River to revolutionize power generation in Ethiopia. The dam has been under construction for more than a decade. It finally began filling with water in 2020, and has been generating hydroelectric power since 2022. But its current operations represent only a small fraction of its full potential, assuming the project is completed smoothly. For these reasons, Chinese Bitcoin miners are flocking to Ethiopia in 2024, so much so that 19 out of the 21 Bitcoin mining companies that have reached agreements with the Ethiopian state energy company are headquartered in China. In addition, several details of the dam sweetened the deal; Not only has a significant amount of Chinese investment already been spent on building the dam, but its elevation and consistent climate create fairly ideal conditions for year-round mining operations. This is the situation as it stands today, but this new major infrastructure partnership has only just begun. One can only imagine how far he could go from here.
However, there are several concerns about the site's long-term viability as a global hotspot for Bitcoin mining. First of all, the Renaissance Dam was a hotly contested issue between Ethiopia and the Egyptian government. The Nile River has two main tributaries, the White and Blue Nile. Although the White Nile is one of the longest rivers in the world, extending more than 2,000 miles from Lake Victoria to where it meets its counterpart in Sudan, the much shorter Blue Nile flowing from the Ethiopian highlands provides about 85% of the water. Once the two rivers meet. The Egyptian government's long-standing concern is that the dam could cut off most of the country's water, unless Ethiopia is very careful not to fill the dam too quickly. However, until the dam is full, it will only be able to generate a small fraction of its projected energy targets.
Talks between the two governments have repeatedly broken down over the past few years, and there is no formal agreement to resolve the dispute. However, the Ethiopian government claimed that it will continue construction work and normal operations whether an agreement is reached or not. The United States has mediated several talks between these two governments, and is generally considered supportive of Egypt's position. Given the rivalry between the United States and China, there is no shortage of opportunities for either side to try to influence the dam's progress and operations.
However, despite these potential setbacks, the GERD in its current state is largely operational, with many Bitcoin miners already setting up shop. Reuters She stated that 90% of Ethiopia's electricity comes from hydroelectric sources, and that the final dam will produce about the same amount of electricity that the entire country produces today. “Ethiopia will become one of the most popular destinations for Chinese miners,” claimed Nu Shu, founder of the China Digital Mining Association, and is already arranging for representatives from additional mining companies to visit the site.
Regarding the actual infrastructure to be built from this multinational partnership, details have been particularly scant, especially given how Cal Casa revised its claim to downplay the exact $250 million invested. Bloomberg He claims that most government discussions of the project use various euphemisms such as “high-performance computing” and “data mining” to refer to Bitcoin mining, with the project officially designated as a data center. “Ethiopia is strictly regulated,” said Nemo Semeret, CEO of Ethiopian mining company QRB Labs, which is involved in pro-bitcoin lobbying efforts. “Introducing a new sector like this was a huge challenge, and we have been working for the past two years to get all the necessary permissions from the government.” In other words, it appears that the government is still somewhat sensitive about its direct endorsement of Bitcoin and the industries that support it. However, its actions have greatly supported Bitcoin miners.
Although most of Ethiopia's mining and infrastructure construction has been an entirely Chinese business deal, the huge potential of this project has already been recognized around the world. Marathon Digital, the largest Bitcoin mining company in North America, specifically drew attention to the site. Charlie Schumacher, Marathon's vice president of corporate communications, publicly stated, “We are looking to Africa. We believe that Bitcoin mining is, among other things, a technological solution for the energy sector, and Africa could be a great place to prove this thesis.” He went on to add that “workers Bitcoin mining can stimulate the construction of more energy across the continent, by acting as a first customer for new energy projects.”
In other words, industry leaders around the world viewed this project as a strong first step. Even if the Ethiopian government makes it difficult for Marathon or other American mining companies to buy into this Chinese investment hub, there are endless opportunities to recreate the project. Many Ethiopians today do not have access to electricity, and Bitcoin mining stimulates hundreds of millions of dollars in electricity generation there. Is there any shortage of other sites that might similarly benefit from these incentives? of course not. Bitcoin has the potential to be an engine of progress around the world, driving electricity generation and employment with it. As an added bonus, it's all renewable. Is it any wonder that people around the world are looking to Bitcoin as a new model for achieving economic independence everywhere?
