Is Africa the next Bitcoin mining hub?
Existing solely online, Bitcoin is powered by a blockchain running on a distributed ledger – or decentralized computer network – that tracks groups of transactions across a network, with Bitcoin miners serving to develop a public record of approved transactions. However, Bitcoin mining requires the use of powerful computing systems and application-specific integrated circuit hardware that consumes enormous amounts of energy, a process that, according to the Cambridge Bitcoin Electricity Consumption Index, consumes approximately 143.5 TWh of electricity each year.
The lucrative Bitcoin mining industry, for which a miner will earn 6.25 bitcoins – equivalent to roughly $250,000 as of April 2022 – for validating a block on the blockchain, has led to an increased general interest in Bitcoin mining in Africa, with data that suggests that regional online search interest has been increasing in countries such as Nigeria, Zimbabwe, Ethiopia, Mauritius and South Africa, among others.
With enormous potential for renewable energy, Africa is well positioned to harness its largely untapped hydro, solar and wind resources as a source of clean energy to catalyze Bitcoin mining on the continent. Planned development of renewable energy in Africa and its allocation to Bitcoin mining will serve to draw criticism from environmental groups away from the cryptocurrency and its mining, thereby increasing the potential profitability of miners and exponential growth of the industry.
In addition, to compensate for the enormous amount of energy and high costs required to mine Bitcoin, miners have begun to work within mining pools, thus facilitating stronger computing capacity and sharing of resources while enabling the potential for regional cooperation.
Uncertainty regarding the profitability of mining operations; the upfront cost of equipment and hardware; the ongoing energy crisis; however, the increasing complexity of Bitcoin mining are all factors that have stifled the industry’s growth in Africa. The continent currently represents just 0.14% of Bitcoin’s hash rate – a metric used to determine how much computing power is used by a network to process transactions – with Egypt being Africa’s biggest hash rate contributor.
Widespread interest in buying and using the cryptocurrency on the continent, which is generally considered a precursor to Bitcoin mining, in conjunction with the rise of companies operating in Africa, such as mining company BigBlock Data Center, has led to an increase in interest in Bitcoin mining from developers, users and investors, thus paving the way for the region to catalyze development. Furthermore, off-grid solar mining in Zimbabwe as well as a Ghanaian IT company, Ghana Dot Com, and South African Bitcoin mining, Bitfarms, have successfully operated Bitcoin mining in their respective countries.
While most African countries have yet to embrace Bitcoin mining, the skyrocketing price of the cryptocurrency in recent years, the continent’s vast energy potential and favorable market conditions are seen as a positive precursor to a booming Bitcoin mining industry in Africa.
