Ethiopia’s Bitcoin Mining Boom: The Cheapest in the World, But at What Cost?

Key Findings

• Mining 1 Bitcoin in Ethiopia costs approximately $1,986, making it one of the most profitable locations for Bitcoin mining.
• Ethiopia ranks 2nd globally in terms of cost-effectiveness for Bitcoin mining, just behind Iran.
• Miners in Ethiopia could produce 161 Bitcoins for the same energy cost required to mine just one Bitcoin in Ireland ($321,112).
• Bitcoin mining in Ethiopia benefits from low electricity costs due to government subsidies and an abundance of hydroelectric power.
• While electricity costs are favorable, regulatory uncertainty and internet reliability present challenges for miners in Ethiopia.
• In contrast, countries like Ireland and Belgium have extremely high mining costs due to higher electricity prices, carbon taxes, and reliance on imported energy.
• Ethiopia may not be fully benefiting from its cheap mining costs, as it risks losing value from its resources without proper regulation and taxation.

How Much Electricity is Needed to Mine 1 Bitcoin After the 2024 Halving?

The amount of energy required to mine one Bitcoin remains high, increasing costs depending on local electricity prices. On average, mining 1 BTC consumes around 6,400,000 kilowatt-hours (kWh) of electricity. This is equivalent to:

• Powering 61 U.S. homes for a full year.
• Driving a Tesla Model 3 around the Earth 86 times.

Bitcoin mining has become more energy-intensive over time, particularly after the 2024 halving, which reduced the mining reward and increased competition. This means that cost-efficient electricity is crucial for miners to remain profitable.

How Much Does it Cost to Mine 1 Bitcoin in Ethiopia?

Ethiopia’s $1,986 per Bitcoin mining cost is among the lowest in the world, thanks to hydroelectric power and government-controlled energy prices. This makes Ethiopia an attractive destination for Bitcoin miners, especially when compared to countries with high electricity costs.

For context:

• Mining in Ethiopia ($1,986) is 54 times cheaper than in the United States ($107,000).
• It is 161 times cheaper than in Ireland ($321,112), the world’s most expensive country for Bitcoin mining.
• Even within Africa, Ethiopia ranks as one of the most cost-effective locations, beating Libya ($5,296) and Nigeria ($9,269).

Why is Bitcoin Mining More Expensive in Countries Like Ireland and Belgium?

Countries like Ireland and Belgium face high Bitcoin mining costs due to several factors:

1. High Electricity Prices: These countries rely on expensive energy sources, including natural gas and imported electricity, leading to higher costs per kilowatt-hour.
2. Carbon Taxes: The European Union imposes strict environmental regulations and carbon taxes, making energy more expensive.
3. Energy Import Dependence: Unlike Ethiopia, which generates most of its electricity from renewable hydroelectric sources, countries like Belgium and Ireland depend on imports, making energy prices volatile and costly.
4. Limited Government Support for Mining: Some European governments discourage Bitcoin mining due to its high energy consumption and environmental impact.

Is Ethiopia Losing Out on Bitcoin Mining Profits?

While Ethiopia offers some of the lowest mining costs, the country may not be fully benefiting from its natural resources.

• Minimal Revenue Capture: Ethiopia’s cheap electricity largely benefits miners, many of whom may be operating without proper taxation or reinvestment in the local economy.
• Potential for Export Revenue Loss: Hydroelectric power that could be sold to neighboring countries or used for industrial growth is instead being used for mining without clear economic returns.
• Lack of Crypto Regulations: Ethiopia has no well-defined regulatory framework to capitalize on Bitcoin mining revenue through taxation or licensing fees.
• Electricity Infrastructure Strain: If mining operations expand without government oversight, they could strain the grid, leading to power shortages for other sectors.

To maximize benefits, Ethiopia could explore:

• Implementing a mining tax or electricity premium for miners to ensure national revenue gains.
• Encouraging reinvestment in local industries to ensure Bitcoin profits benefit the Ethiopian economy.
• Developing clearer regulations to attract reputable investors while controlling illegal mining operations.

The Global Bitcoin Mining Landscape: How Does Ethiopia Compare?

While Ethiopia enjoys some of the lowest mining costs, profitability is not just about electricity prices. The global landscape is shifting as miners relocate to cheaper regions.

Top 10 Most Profitable Countries for Bitcoin Mining

Top 10 Least Profitable Countries for Bitcoin Mining

Ethiopia is one of the most profitable places in the world to mine Bitcoin, thanks to low electricity costs driven by renewable energy sources. However, the country must carefully consider whether its cheap energy policies are truly benefiting its economy.

To maximize national benefits, Ethiopia should consider implementing mining taxes, regulating the industry, and ensuring miners reinvest locally. Otherwise, the country risks missing out on significant economic opportunities while providing ultra-low-cost energy for external Bitcoin profits.

This study used electricity cost data from globalpetrolprices.com (December 2023), as well as mining hardware efficiency data from the CoinWarz Bitcoin calculator. The average mining electricity consumption was calculated using 8 high-performance mining rigs, considering an estimated mining difficulty level of 89,471,664,776,971.

Sources:

• GlobalPetrolPrices.com (December 2023)
• CoinWarz Bitcoin Calculator
• Ethiopian Electric Power (EEP) Data Reports
• Cambridge Bitcoin Electricity Consumption Index (CBECI)