Chinese Partnership to Bring Large-Scale Bitcoin Mining to Ethiopia

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The Ethiopian government is set to enter a partnership with companies from China to establish powerful new Bitcoin mining infrastructure in the country, all centered around a massive hydroelectric dam.

On Thursday, February 14, actors involved with the project announced a partnership between Ethiopian Investment Holdings, a state-owned investment firm, and Data Center Service PLC, subsidiary of West Data Group, based in Hong Kong. Kal Kassa, the CEO for Ethiopia at Hashlabs Mining, initially went to Twitter to claim that “The partnership will be for the purposes of a $250 million data mining project in Ethiopia,” but he would subsequently delete this announcement and replace it with a similar announcement that did not include an exact dollar amount. Regardless of the specific cash commitments involved, the aim of this partnership is clear: the establishment of a data center and other critical infrastructure to supercharge Bitcoin mining in Ethiopia.

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Since Bitcoin mining has largely been prohibited in China, West Data Group has been actively working to begin new operations abroad, in familiar mining hubs like Kazakhstan and the United States alongside multiple other African nations. Chinese investment money has already been flowing into various countries in Africa due to the Belt and Road Initiative, but Ethiopia has a couple of distinct advantages that make it even more attractive: for one, it joined BRICS (Brazil, Russia, India, China, South Africa) in January 2024, making it the newest member of this economic alliance of emerging nations. This added diplomatic relationship will doubtlessly make massive international deals run much more smoothly.

The second biggest advantage in Ethiopia’s favor is the Grand Ethiopian Renaissance Dam (GERD), a massive project to construct a dam on the Nile River to revolutionize Ethiopia’s energy generation. The dam has been in 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 are only a fraction of its full potential, assuming the project completes smoothly. For these reasons, Chinese Bitcoin miners have been flocking to Ethiopia in 2024, to the extent that 19 of the 21 bitcoin mining firms that have reached agreements with Ethiopia’s state power company are headquartered in China. Several specifics of the dam have sweetened the deal additionally; not only has a substantial amount of Chinese investment already gone into the dam’s construction, but its altitude and consistent climate create conditions that are fairly ideal for year-round mining operations. This is the situation as it stands today, but this major new infrastructure partnership has only just started. One can only imagine how far it can go from here.

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Nevertheless, there are several concerns with the long-term viability of the site as a global hotspot for Bitcoin mining. First of all, the GERD has been something of 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, stretching more than 2,000 miles from Lake Victoria to where it meets up with its counterpart in Sudan, the much shorter Blue Nile flowing from the Ethiopian Highlands supplies about 85% of the water once the two tributaries meet. The Egyptian government’s long-held concern is that the dam could cut off most of their country’s water, unless Ethiopia is extremely scrupulous with not filling the dam too quickly. However, until the dam is full, it will only be able to generate a fraction of projected energy goals.

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Talks between the two governments have repeatedly broken down over the past several years, and no agreement to resolve this dispute formally exists. The Ethiopian government has nevertheless claimed that they will proceed with normal construction and operations whether an agreement is reached or not. The United States has brokered several of the talks between these two governments and is generally considered to favor Egypt’s position; considering the rivalry between the US and China, there are no shortage of opportunities for either side to attempt to influence the dam’s progress and operations.

Still, despite these possible setbacks, the GERD in its present state is substantially operational, with many Bitcoin miners already setting up shop. Reuters reported that 90% of Ethiopia’s electricity comes from hydroelectric sources, and that the finished dam will produce about as much electricity as the entire country generates today. Nuo Xu, founder of China Digital Mining Association has claimed that “Ethiopia will become one of the most popular destinations for Chinese miners,” and he is already arranging for representatives from additional mining firms to visit the site.

As far as the actual infrastructure that will be built from this multinational partnership, details have been particularly sparse, especially considering how Kal Kassa revised his claim to downplay the specific amount $250M invested. Bloomberg claims that most government discussion of the project uses various euphemisms like “high-performance computing” and “data mining” to refer to Bitcoin mining, with the project officially designated a data center. “Ethiopia is heavily regulated,” claimed Nemo Semret, CEO of Ethiopian miner QRB Labs, which is involved in pro-Bitcoin lobbying efforts. “Introducing a new sector like this has been a big challenge, and we’ve been working for the last two years to get all the necessary permissions from the government.” In other words, it seems that the government still has some sort of squeamishness over directly endorsing Bitcoin and the industries that support it. Nevertheless, its actions have supported Bitcoin miners a great deal.

Although most of the mining and infrastructure building in Ethiopia has been a thoroughly Chinese business deal, the vast potential in the project has already been recognized worldwide. Marathon Digital, the largest Bitcoin miner in North America, specifically called attention to the site. Charlie Schumacher, Marathon’s vice president of corporate communications, publicly stated that “we are looking at Africa. We believe that bitcoin mining is, among other things, a technology solution for the energy sector, and Africa may be a great place to prove this thesis”. He went on to add that “Bitcoin miners can incentivize the buildout of more power across the continent, by serving as the first customer for new power projects”.

In other words, industry leaders worldwide have identified this project as a powerful first step. Even if the Ethiopian government makes it difficult for Marathon or other US mining companies to buy into this Chinese investment hub, there are countless opportunities to recreate the project. Many Ethiopians today do not have access to electricity, and Bitcoin mining is incentivizing electricity generation there with hundreds of millions of dollars. Is there any shortage of other locations that would similarly benefit from such incentives? Of course not. Bitcoin has the power to be a driver for progress worldwide, pushing electricity generation and job opportunities with it. And as an added benefit, it’s all renewable. Is it any wonder that people worldwide are looking at Bitcoin as a new model to bring economic independence everywhere?