How a Jack Dorsey-backed Bitcoin miner is using a volcano in Kenya to turn on lights in rural homes – CNBC

How a Jack Dorsey-backed Bitcoin miner is using a volcano in Kenya to turn on lights in rural homes – CNBC

  • Gridless, backed by Jack Dorsey’s Block, operates bitcoin mines in Kenya, Malawi and Zambia.
  • The company’s bitcoin mine in Kenya, near an extinct volcano, powers 5,000 homes in the country.
  • “As often happens, you will have an energy overload during the day or even at night, and there will be no one to absorb that energy,” Erik Hersman, CEO of Gridless, told CNBC.

HELL’S GATE, Kenya — A two-and-a-half-hour drive northwest of Nairobi, a small group of bitcoin miners has set up shop at the site of an extinct volcano near Hell’s Gate National Park.

The mine, nestled on the shores of Lake Naivasha, is operated by a startup called Gridless and consists of a single 500-kilowatt mobile container that, from the outside, looks like a small mobile home.

Backed by Jack Dorsey’s Block, Gridless electrifies its machines with a mix of solar power and stranded, wasted energy from a nearby geothermal site. It is one of six mines managed by the company in Kenya, Malawi and Zambia, powered by a mix of renewable inputs and working towards a broader mission of securing and decentralizing the Bitcoin network.

Gridless operation Gridlesin Hell’s Gate runs on geothermal energy.

MacKenzie Sigalos

“Most people think about bitcoin and the price of bitcoin and how they can save value or maybe spend it,” Erik Hersman, CEO of Gridless, told CNBC during a visit to the Kenyan mine earlier this year. “This won’t happen without us and Bitcoin miners being globally distributed.”

Decentralization is a key feature of Bitcoin because it means the network is not controlled by any entity and cannot be shut down, even if a government disapproves.

Bitcoin and some other cryptocurrencies are created through a process called proof of work, in which miners around the world use very powerful computers that collectively validate transactions and simultaneously create new tokens. The process requires a lot of electricity, leading miners to seek out the cheapest sources of energy.

Although there are more than a dozen publicly traded miners, thousands of smaller private operations also compete to process transactions and get paid in new bitcoins. This includes individual miners in countries from Venezuela to Lebanon, and can involve a single mining rig in a kitchen or several hundred thousand of them in an industrial-grade data center.

Gridless operates a geothermally powered Bitcoin mine at Hell’s Gate on the shores of Lake Naivasha.

MacKenzie Sigalos

Regardless of location, bitcoin mining is a volatile business, as much of the economy depends on the price of the cryptocurrency. After losing 60% of its value in 2022, bitcoin came back strongly, reaching a record high above $73,000 in March, before retreating a bit in recent weeks.

Much of the rally has to do with the launch of Bitcoin spot exchange-traded funds in the United States, as well as optimism surrounding the so-called halving that took place Friday evening. This event takes place every four years and aims to halve the reward for Bitcoin miners, thereby reducing the rate at which new Bitcoins enter the market. Previous halving events were followed by sharp rises in the cryptocurrency.

“Bitcoin is effectively unbreakable at this point,” said Adam Sullivan, CEO of Core Scientific, a Texas-based Bitcoin miner. “Bitcoin is at a point where it is more profitable to continue supporting the network than to try to break it.”

Deutsche Bank analysts wrote in an April 18 note that they expect the geography of cryptocurrency mining to change after the halving, as lower profit margins force miners to seek cheaper and more reliable forms of energy. Analysts have written that the United States currently accounts for 40% of the mining sector, 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.

Toronto-based Bitfarms now operates in Argentina, while Florida-headquartered Marathon Digital has expanded to the United Arab Emirates and Paraguay.

Hersman, 48, grew up in Kenya and Sudan, where his parents were linguists. Before getting into Bitcoin mining, he and his two co-founders, Philip Walton and Janet Maingi, spent years building internet connectivity infrastructure in rural and urban Africa.

Gridless operates bitcoin mines in Kenya, Malawi and Zambia with a mix of renewable energy sources. The company’s Hell’s Gate site runs on geothermal energy.

MacKenzie Sigalos

In early 2022, the trio began brainstorming creative solutions to bridge the gap between electricity generation and capacity, as well as the lack of access to electricity in Africa. They came up with the idea of ​​Bitcoin mining, which could potentially solve a big problem for renewable energy developers by taking their stranded energy and spreading it to other parts of the continent. In Africa, 43% of the population, or around 600 million people, do not have access to electricity.

Gridless now has eight full-time employees and manages much of its operations remotely through its software.

Hell’s Gate is a deep, winding canyon home to cheetahs, zebras and giraffes and lined with cliffs, volcanoes and thick bushes.

The area is covered in ash and plumes of sulfuric steam will periodically emit from the ground, reminiscent of the surrounding smoking volcanic craters that wiped out part of the indigenous Maasai tribe in the mid-19th century and threatened others who dared to take over. reside there.

Gone are the days of deadly eruptions and spewing lava. Instead, a complex, labyrinthine piping system and volcanic plugs comprise several geothermal power plants.

A borehole at the Olkaria geothermal power station in Hell’s Gate National Park.

Getty Images/Michael Gottschalk

Volcano-powered Bitcoin mining is not new.

Iceland, El Salvador and other countries are harnessing geothermal energy to mine Bitcoin. To make conditions work for miners, companies need a combination of local government buy-in, cheap and abundant energy and some 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 energy company, that does it,” Carter said. He cited the Middle East, which is moving into flare gas extraction, as an example of state actors entering the sector.

“In some cases it’s with the explicit blessing of the nation state, like Bhutan, and in Texas it’s just with local regulators and very favorable local conditions,” he said.

Africa is home to about 10 terawatts of solar capacity, 350 gigawatts of hydropower and another 110 gigawatts of wind power.

Some of this renewable energy is already being harnessed, but much is not, because building specialized infrastructure to capture it is expensive. Even with 60% of the world’s best solar resources, Africa has only 1% of installed solar PV capacity.

Enter Bitcoin miners.

Bitcoin has a bad reputation because of the amount of energy it consumes, but it can also help unlock these trapped renewable energy sources. Miners are essentially buyers of energy, and co-location with renewables creates a financial incentive to boost production.

“As often happens, you will have excess power during the day or even at night, and there will be no one to absorb that power,” Hersman said. He said his company’s 50-kilowatt mining container can “soak up whatever is excess throughout the day.”

Steam tubes at the Olkaria geothermal power plant in Hell’s Gate National Park.

Getty Images/Michael Gottschalk

“In a second or a minute, we’re going up and down on a number of active miners,” Hersman said. “It could go down to 50 kilowatts, then up to 300 kilowatts, then up to 200 kilowatts, and then up to another level – and it will happen all day and all night.”

According to the International Energy Agency, in rural areas of Africa, “where more than 80% of people without electricity live, mini-grids and stand-alone systems, mainly based on solar energy, constitute the most viable solutions.

Bitcoin miners’ demand for these semi-stranded assets makes renewable energy in Africa economically viable. The electricity supplier profits from selling the energy that was previously discarded, while energy plants sometimes reduce costs for the customer. At one of the Gridless pilot sites in Kenya, the hydroelectric plant reduced the price of electricity from 35 cents per kilowatt hour to 25 cents per kWh.

Capacity building also electrifies households.

Gridless claims 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 containerized cold storage warehouses for local farmers, battery charging stations for electric motorcycles and public WiFi points.

“It’s not really sexy,” Hersman said. “It’s a mining container made from a shipping container. It’s got a bunch of stupid machines in it that run the same equation over and over, but that’s actually what secures the network.”

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