HELL'S GATE, Kenya – Two and a half hours drive northwest of Nairobi, a small group of Bitcoin Miners have settled on the location of an extinct volcano near Hell's Gate National Park.
The mine is hidden on the sting of Lake Naivasha and is run by a startup called Gridless. It consists of a single mobile 500 kilowatt container, which looks like a small caravan from the surface.
Supported by Jack Dorsey's blockGridless electrifies its machines using a combination of solar energy and the lost, wasted energy of a close-by geothermal plant. It is considered one of six mines the corporate operates in Kenya, Malawi and Zambia, powered by a combination of renewable energy sources and dealing towards a broader mission of securing and decentralizing the Bitcoin network.
“Most people think about Bitcoin and the price of Bitcoin and how they can save value in it or perhaps spend it,” Gridless CEO Erik Hersman told CNBC during a visit to the Kenyan mine earlier this 12 months. “This cannot be done without the Bitcoin miners and us being globally distributed.”
Decentralization is a key feature of Bitcoin since it implies that the network is just not controlled by any entity and can’t be shut down – even when a government refuses to achieve this.
Bitcoin and another cryptocurrencies are created through a process called proof-of-work, wherein miners around the globe run high-performance computers that collectively validate transactions while concurrently creating latest tokens. The process requires vast amounts of electricity, leading miners to search for the most cost effective sources of electricity.
While there are greater than a dozen publicly traded miners, hundreds of smaller, private corporations are also competing to process transactions and be paid in latest Bitcoins. This includes individual miners in countries from Venezuela to Lebanon, and it could possibly be a single mining rig in a kitchen or several hundred thousand of them in an industrial-grade data center.
Regardless of where operations happen, Bitcoin mining is a volatile business because much of the economics rely upon the value of the cryptocurrency. Since losing 60% of its value in 2022, Bitcoin has recovered rapidly, reaching a record high of over $73,000 in March before retreating barely in recent weeks.
Much of the rally is because of the launch of spot Bitcoin exchange-traded funds within the U.S. in addition to optimism surrounding the so-called halving late Friday. This event occurs every 4 years and is meant to halve the reward for Bitcoin miners, thereby reducing the speed at which latest Bitcoins come to market. Previous halving events have been followed by major cryptocurrency surges.
“Bitcoin is virtually unbreakable right now,” said Adam Sullivan, CEO of Nuclear science, a Bitcoin miner based in Texas. “Bitcoin is at a point where it is more profitable to continue to support the network than to try to destroy it.”
Analysts at Deutsche Bank wrote in a note on April 18 that they expect the geography of crypto mining to shift after the halving as reduced profit margins force miners to hunt cheaper and more reliable types of energy. The analysts wrote that the US currently accounts for 40% of mining, Russia 20% and China 15%.
“Latin America, Africa and the Middle East have attracted the attention of crypto miners due to their lower energy costs,” they wrote.
Bitfarms, based in Toronto, currently operates in Argentina Marathon Digitalheadquartered in Florida has expanded to the United Arab Emirates and Paraguay.
Hersman, 48, grew up in Kenya and Sudan, where his parents were linguists. Before starting Bitcoin mining, he and his two co-founders, Philip Walton and Janet Maingi, spent years constructing web connectivity infrastructure in rural and concrete Africa.
In early 2022, the trio began brainstorming creative solutions to the facility generation/capability gap and lack of access to electricity in Africa. They got here up with the thought of Bitcoin mining, which could potentially solve an enormous problem for renewable energy developers by distributing their lost electricity to other parts of the continent. In Africa, 43% of the population, or around 600 million people, haven’t any access to electricity.
Gridless now has eight full-time employees and manages much of its operations remotely using its software.
Turn lava into Bitcoin
Hell's Gate is a deep and winding gorge, home to cheetahs, zebras and giraffes, and lined with cliffs, volcanoes and thick bush.
The area is roofed in ash and clouds of sulfurous steam periodically pour from the bottom, a reminder of the encompassing smoldering volcanic craters that worn out a few of the native Maasai tribes within the mid-Nineteenth century and threatened others who dared to invade there reside.
Gone are the times of deadly eruptions and lava spewing. Instead, several geothermal power plants consist of a sophisticated, labyrinthine piping system and volcanic plugs.
Volcano-powered Bitcoin mining is nothing latest.
Iceland, El Salvador and other countries are using geothermal energy to mine Bitcoin. To make conditions work for miners, the businesses need a mix of approval from local authorities, low-cost and abundant electricity and a few infrastructure, said Nic Carter, founding partner of Castle Island Ventures, which focuses on blockchain investments.
“If you have those three ingredients, it can work, but sometimes it's the nation state or a national, state-owned energy company that does it,” Carter said. He pointed to the Middle East, which is entering into flare gas mining, for instance of state actors entering the business.
“In some cases this happens with the explicit consent of the nation state, like Bhutan, and in Texas then only with very favorable local regulators and local conditions,” he said.
In Africa there may be an estimated 10 terawatts of solar capability, 350 gigawatts of hydropower and one other 110 gigawatts of wind power.
Some of this renewable energy is already getting used, but a big a part of it is just not because constructing special infrastructure to extract it is dear. Despite having 60% of the world's best solar resources, Africa only has 1% of the installed solar PV capability.
Enter Bitcoin miners.
Bitcoin has a nasty repute due to amount of energy it uses, but it could possibly also help unlock these locked-in renewable energy sources. Miners are essentially energy buyers, and co-locating with renewables creates a financial incentive to extend production.
“As is often the case, there is a surplus of electricity during the day or even at night, and there is no one to absorb that electricity,” Hersman said. He said his company's 50-kilowatt mining container can hold “whatever is left throughout the day.”
“Within every second or minute, we fluctuate up and down in a certain number of miners running,” Hersman said. “It could go down to 50 kilowatts, then to 300 kilowatts, then to 200 kilowatts, then to another level – and that will happen all day and all night.”
According to the International Energy Agency, in rural areas of Africa, “where over 80% of people live who suffer from a lack of electricity, mini-grids and island systems, mostly solar-based, are the most viable solutions.”
Bitcoin miners’ demand for these semi-stranded assets is making renewable energy economically viable in Africa. The utility company profits from selling energy that was previously disposed of, while the facility plants sometimes reduce costs for the shopper. At considered one of the gridless pilot sites in Kenya, the hydroelectric power plant reduced the value of electricity from 35 cents per kilowatt hour to 25 cents per kWh.
The capability expansion also electrifies households.
Gridless says its sites have powered 1,200 homes in Zambia, 1,800 in Malawi and 5,000 in Kenya. The company's mines have also provided electricity for container cold storage for local farmers, battery charging stations for electric motorcycles and public Wi-Fi points.
“It’s not really sexy,” Hersman said. “It is a mining container made from a shipping container. There are a bunch of stupid machines in there running the same equation over and over again, but it’s actually what secures the network.”
image credit : www.cnbc.com