A CRYPTOCURRENCY that has gained significant traction since its creation in 2009, Bitcoin mining involves the creation of new bitcoins through deciphering complicated mathematic equations that verify and process the currency’s transactions, thus resulting in the exchange of Bitcoin for the miner as payment.
A global surge in interest in Bitcoin mining, in conjunction with Africa’s abundant and affordable energy sources, has resulted in the continent’s potential to become a future regional mining hub.
Existing solely online, Bitcoin is powered by a blockchain that runs on a distributed ledger – or decentralised computer network – that tracks groups of transactions across a network, with Bitcoin miners serving to develop a public record of approved transactions. Bitcoin mining, however, requires the use of powerful computing systems and application-specific integrated circuit hardware that uses vast amounts of energy, a process which, 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 – equating to approximately $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 suggesting that regional search interest online has been on the rise in countries such as Nigeria, Zimbabwe, Ethiopia, Mauritius, and South Africa, among others.
With an immense potential for renewable energy, Africa is well-positioned to leverage its largely untapped hydropower, solar and wind resources as a source of clean energy to catalyse Bitcoin mining on the continent. Planned renewable energy developments in Africa and its allocation towards Bitcoin mining would serve to draw criticism from environmental groups away from the cryptocurrency and its mining practices, thus increasing the potential profitability for miners and exponential growth of the industry.
Additionally, in order to offset the vast amount of energy and high costs required to mine Bitcoin, miners have begun to work within mining pools, thus facilitating stronger computing capability and the sharing of resources while enabling the potential for regional collaboration.
Uncertainty regarding the profitability of mining; the upfront costs of equipment and hardware; the ongoing energy crisis; and the increasing complexity of Bitcoin mining, however, are all factors that have stifled the industry’s growth in Africa. The continent currently represents merely 0.14 percent of Bitcoin’s hash rate – a metric used to determine how much computing power is used by a network to process transactions –, with Egypt serving as Africa’s largest 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 emergence of companies operating in Africa, such as mining firm, BigBlock Data Centre, has led to a surge in interest for Bitcoin mining from developers, users and investors, thus paving the way for the region to catalyse development. Furthermore, off-grid solar mining operations in Zimbabwe as well as a Ghanian IT company, Ghana Dot Com, and South African Bitcoin mining operation, Bitfarms, have successfully powered Bitcoin mining operations 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 favourable market conditions are considered a positive precursor to a booming Bitcoin mining industry in Africa.