Chinese Bitcoin Mining Company Expands to Ethiopia, Targeting the Country's Ultra-Low Electricity Costs

Chinese bitcoin (BTC) mining company BIT Mining (BTCM) has announced a $14 million deal to acquire bitcoin mining facilities in Ethiopia, as part of its strategy to extend the lifespan of its aging mining rigs and capitalize on the country's low electricity costs.

According to Dr. Youwei Yang, chief economist at BIT Mining, the high electricity prices in Ohio, where BIT Mining currently operates its bitcoin mining facilities, have limited the company to deploying only the newest ASICs, such as the first or second generation. However, in Ethiopia, the company can deploy older generation machines due to the lower electricity costs.

“The price of electricity is maybe 70% higher in Ohio than in Ethiopia, sometimes almost double, so it can only run very advanced ASICs, like the newest or second newest generations,” said Yang in an interview with CoinDesk. “Now we can just move older generation machines into Ethiopia.”

This move is significant because BIT Mining primarily operates a hosting business, where it houses mining facilities for various clients, in addition to mining litecoin (LTC) and dogecoin (DOGE) itself. State-of-the-art mining rigs are expensive, with a single machine costing between $5,000 and $10,000 for retail buyers. Investors are typically hesitant to send such valuable equipment to war-torn regions.

Hence, the strategy is to install the newer rigs in the U.S. and send the aging ones to Ethiopia. This creates a positive feedback loop, where investors can extract greater returns from their machines compared to if BIT Mining were limited to operating in the U.S., which, in turn, attracts more capital, said Yang.

“We can get at least two extra years by moving the rigs to Ethiopia, and then maybe after that, they're completely done,” said Yang.

Ethiopia, a hotspot for bitcoin mining

But what makes Ethiopia an ideal destination for BIT Mining's bitcoin mining expansion?

For one, the country's electric standard is similar to China's, which enables BIT Mining to leverage its engineering team's expertise and redeploy some of the electric equipment it used in the Middle Kingdom before the bitcoin mining ban.

Moreover, Ethiopia boasts an abundance of hydroelectric power, thanks in part to Chinese investments, which have totaled $8.5 billion across more than 3,000 projects in recent years. For instance, China helped fund the construction of the Grand Ethiopian Renaissance Dam (GERD), which, upon completion, will become the largest dam in Africa, generating over 5,000 MW.

However, not all of Ethiopia's electric output is utilized yet, presenting an opportunity for bitcoin miners, especially given the Ethiopian government's support for the mining industry. In fact, the country contributes 1.5% to Bitcoin's total hashrate, according to Hashrate Index, which is roughly equivalent to Norway's contribution to the network.

This is despite the Ethiopian federal government's tenuous control over the country's territory. Hundreds of thousands of Ethiopians were killed in the government's war against the Tigray People's Liberation Front from 2020 to 2022, and the state only signed a peace treaty in December with the Oromo Liberation Army, which it had been fighting in some capacity since the 1970s.

When asked if BIT Mining had any concerns regarding the country's social unrest, Yang stated that the firm had been “studying, researching and also visiting [Ethiopia] several times, just [ascertaining] that it's a stable place.” To avoid any unforeseen issues, the decision was made to purchase a facility rather than constructing one from scratch, he added.

Even so, convincing BIT Mining employees to relocate to Ethiopia from their previous homes in the U.S. or China was a challenge, according to Yang.

“People obviously like to live and work in richer and safer countries,” he said. While a third of the facility's operating team are foreign at present, the goal is for the team to eventually comprise mostly locals, he added.

Meanwhile, the company is seeking new investment opportunities in the country, whether in energy infrastructure projects, data centers for AI purposes or additional bitcoin mining facilities.

“There's plenty of opportunities in Ethiopia,” said Yang. “The AI thing… We've been studying it for the last six to nine months. We have the power. We have the people. We have the ability to do it. But [the whole process] is very capital heavy. Construction in the U.S. is a lot more expensive, so it's very hard to do a pilot experiment, but it's a lot easier to [try one] in Ethiopia.”