Exploring the Impact of Bitcoin Mining on African Power Systems

While one might not associate bitcoin mining with sustainable development in Africa, some are predicting that the industry will help people across the continent.

Africa is the least developed continent on Earth, with millions still without access to electricity. Bitcoin mining, the process of minting new bitcoins, could help to build up Africa’s power grids and provide electricity to rural communities.

To understand the situation and how it could affect Africa, there needs to be a basic understanding of how bitcoin mining works.

To “mine” for bitcoin, high-powered computers are used to verify virtual coin transactions. Bitcoin operates on what is known as a blockchain, essentially a public ledger, which contains the history of every transaction. The miners’ computers solve complicated math problems to add new blocks to the chain and are in turn rewarded with the digital token, making the endeavor profitable.

Bitcoin prices have exploded over the past few months, making mining ever more attractive. Bitcoin has been hovering around $70,000 — that is up 155% in just the past six months alone and marks jaw-dropping 1,200% gains in the past five years as the cryptocurrency becomes more popular.

Mining for the precious bitcoins requires a lot of energy, which is where Africa, plumb with opportunity, comes into play.

During a recent interview with the Washington Examiner, the Bitcoin Policy Institute’s Grant McCarty pointed out that bitcoin miners go to where energy is cheapest and most available. He noted that an event called the halving is also set to occur this month.

About every four years, the block rewards for bitcoin miners get slashed in half, reducing the supply of new bitcoins by 50%. That makes the product a scarcer commodity and tends to raise its price in the following months. So in the coming years, as more halvings occur, cheaper energy will be needed to maintain profit margins.

“Where’s the cheapest energy in the world? Well, it’s where energy is just being wasted. Where it’s being generated but it can’t be monetized,” McCarty said. “Increasingly, what we’re seeing is bitcoin miners are using wind, they’re using solar, they’re using hydro runoff, they’re using a ton of renewable and sustainable energy.”

He said bitcoin miners are expected to set up shop using untapped renewable energy not only in the United States but in places like Africa, where there is a ton of energy generation but no buyers. He said that new parts of Africa may become electrified because of the energy grids built out due to bitcoin miners:

“There are a bunch of parts of Africa that essentially going to be able to electrify, bring grids online … because they are going to be able to use bitcoin miners to purchase energy and then build out an efficient energy grid.”

Speaking to the Washington Examiner during an interview on the sidelines of the Bitcoin Policy Institute’s annual summit on April 9 in Washington, D.C., Jayson Browder, head of public policy for Marathon Digital Holdings, explained that in Africa in particular, there is a mismatch of power generation and power usage.

He said that over the last decade a lot of international organizations and governments have encouraged African countries to build these very large power generation facilities. But there isn’t the demand yet in those regions to use all of that excess power, given limited electric grid build-out, which is why bitcoin miners are increasingly interested in using that cheaper excess energy to mine for the cryptocurrency.

“We see Bitcoin mining as a tool that these governments can then leverage to help solve some of the energy challenges they have,” Crowder said. “Some of these assets are stranded or underutilized. Because the bitcoin miners are modular, you can move them anywhere — we can set up right next to the hydro project, monetize that asset that was not producing anything, and then the government can then use that money to then incentivize the build-out of those utility lines to wherever the energy needs to go.”

Crowder explained that if, several years down the line, the partnership has resulted in utility lines being built out and the energy is being used at full capacity for that area’s citizens, the miners can then relatively easily move to another energy asset.

Alex Gladstein, chief strategy officer at the Human Rights Foundation, told the Washington Examiner that the phenomenon involves “the market realizing that every single power generation station in a place that doesn’t really have a grid wastes energy.”

Gladstein said that a common narrative in the media is that bitcoin wastes energy, although he said that the opposite is true.

“So the market is going to realize that bitcoin is the technology that you use to save that wasted energy,” he said. “So people are coming in and setting up bitcoin mining and saving that wasted energy so that there’s no more waste.”

He said that bitcoin miners are setting up shop in remote places like Africa and finding the wasted power.

“All of a sudden now, the bitcoin network is buying that energy and providing the local companies with capital that they need to expand,” he said, noting that massive number of people in Africa who are still without electricity.

CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER

Speaking during a panel during the summit in Washington, Charlene Fadirepo, CEO of Mango Digital Strategies, said that through miners setting up shop in places like Africa, “you’re creating electricity and bringing it to rural communities that have never had electricity before.”

“Kids can study at night; kids get the chance to not use paraffin lamps. So, you have health outcomes that are improved,” she said of further electrification of rural communities in Africa.