Ever wonder why Ethiopia suddenly stopped issuing new power permits for crypto mining? This story reveals a hidden connection between the digital world of cryptocurrency and the very real world of your electricity bill.
The simple truth is that crypto and electricity are highly linked, and this relationship is now causing a major disruption in countries worldwide.
What is crypto mining, anyway?
Imagine a digital treasure hunt in which thousands of powerful computers race against each other to solve a complex math problem.
The first computer to solve it gets a prize: a new piece of cryptocurrency. This process is called “mining,” and it’s how cryptocurrencies like Bitcoin are created and how the network stays secure.
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But here’s the catch: that’s not a puzzle you can solve with a pencil and paper. These are complex, data-heavy calculations that require a massive amount of computational power. And all that power comes from one place which is electricity.
The power problem
The demand for electricity from crypto mining is high. A single, small-scale crypto mining operation can consume as much electricity as a small town.
When you multiply that by thousands of these operations, the energy consumption becomes immense.
In Ethiopia, the national power company, Ethiopian Electric Power (EEP), realised that these digital miners were on track to consume a third of the country’s total power output.
This isn’t just a number; it has real-world consequences:
Strain on the grid: When the electricity demand is too high, it puts a huge strain on the power grid. This can lead to blackouts and unstable service for everyone, from hospitals to homes.
Higher costs: The high electricity demand can drive up the price for everyone else. When the system is pushed to its limits, the utility companies often have to turn to more expensive energy sources, and those costs get passed on to you, the consumer.
Competing for resources: In countries like Ethiopia, where about half the population still lacks reliable electricity, this becomes a major issue.
The government had to ask a fundamental question: Should we use our precious energy to power a few data centres for foreign companies or to provide lights and power for our own citizens?
The big pivot
For Ethiopia, the answer became clear. While they initially welcomed crypto miners for the foreign currency they brought in, the long-term cost was too high.
The Ethiopian government decided to prioritise its people and industries. It announced it would no longer issue new power permits for crypto miners and would eventually phase out the existing ones.
This decision shows a growing global trend, not only in Ethiopia or Africa. Countries are realising that the energy-intensive nature of some cryptocurrencies is unsustainable.
It’s a reminder that even in the digital age, a fundamental resource like electricity remains at the heart of everything we do.