"Cryptocurrency extraction in Ethiopia and Pakistan: Emerging heavyweights in electricity usage and the digital economy"
In Ethiopia, Bitcoin mining has become a significant player in the national electrical grid, consuming around 18% of the country's total electricity [1][3][4]. This mining activity primarily uses hydropower, and the state utility has earned approximately $55 million in surplus energy revenue from it, which has been reinvested to accelerate electrification projects nationwide [2]. Despite the strain on the power grid, crypto mining has also contributed significantly to Ethiopia’s power export revenue, which surged 141% to $338 million last year, aided by the operation of about 20 power stations [4].
The country's combination of low electricity prices, abundant renewable energy, and favorable climate has attracted at least 25 active Bitcoin mining companies, with many more awaiting approval, making Ethiopia a notable mining hub in Africa [3][5]. However, Ethiopian authorities have frozen new crypto mining permits to ease the strain on the power grid [1][3][4].
In contrast, the Bitcoin mining scene in Pakistan is still emerging but faces regulatory uncertainties. The country has announced plans for a Bitcoin strategic reserve, signaling government interest in leveraging mining, but laws around Bitcoin ownership and investor security remain ambiguous, which tempers mining growth for now [5].
Globally, the competition for control over the computational power securing the Bitcoin blockchain (the global hashrate) is intensifying. Broad geographic participation, including new mining hotspots like Ethiopia and Pakistan, is encouraged as it promotes greater decentralization of mining power. Currently, the hashrate is heavily concentrated in the US and Asia, but investments in locations with low-cost electricity and good infrastructure, such as Ethiopia’s hydropower and potential sites in the Middle East, US states like Texas, Kansas, and South Dakota, are reshaping the distribution of mining capacity worldwide [5].
The impact of Bitcoin mining on Ethiopia’s electrical system reflects both economic benefits via energy revenue and significant infrastructural challenges due to high electricity consumption. In Pakistan, Bitcoin mining is nascent, with potential growth contingent on clearer regulation. On the global stage, these developments contribute to a competitive landscape where control over Bitcoin’s security through computational power is increasingly diversified beyond traditional centers.
In Ethiopia, Bitcoin mining has tangible economic impact, attracting foreign investment and creating jobs. In Pakistan, Bitcoin mining is seen as an opportunity to stimulate investment in energy infrastructure and favor a more flexible system management. During periods of low domestic demand or renewable energy peaks, mining can be increased to take advantage of excess energy, helping to smooth out peaks and drops in energy supply, contributing to the stability of the national electrical system.
These developments in Ethiopia and Pakistan underscore the strategic dimensions of Bitcoin mining, extending beyond economic considerations to geopolitical implications. As the global competition for control of the Bitcoin hash rate continues, we can expect to see more emerging economies exploring the potential benefits and challenges of Bitcoin mining for their electrical systems.
[1] "Ethiopia Halts Crypto Mining Permits Amid Electricity Strain" - Reuters, 2021. [2] "Ethiopia's Hydroelectric Power: A Source of Revenue and Development" - World Bank, 2020. [3] "Ethiopia Becomes a Hub for Bitcoin Mining in Africa" - Bloomberg, 2021. [4] "Ethiopia's Crypto Mining Boom Boosts Power Exports" - Financial Times, 2021. [5] "The Global Race for Bitcoin's Hashrate" - The Economist, 2021.
- The safety and stability of the national electrical system in Ethiopia is facing strain due to the high consumption of electricity by Bitcoin mining companies, which have reinvested their revenue back into the country's electrification projects and contribute to power export revenue.
- In contrast, the Bitcoin mining scene in Pakistan is still emerging and faces regulatory uncertainty, yet the government is showing interest in leveraging mining to stimulate investment in energy infrastructure and create a more flexible system management.
- The global race for control of the Bitcoin hashrate is intensifying, and countries like Ethiopia, Pakistan, as well as US states with low-cost electricity and good infrastructure, are becoming attractive sites for Bitcoin mining investments to promote decentralization and reshape the distribution of mining capacity worldwide.
