Bitcoin, the new frontier for miners is Ethiopia. Halving nearby: here’s what’s happening and why the geography of supercomputers is changing
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In Colorado Springs, United States, there are entire warehouses full of computers wrapped and covered in cellophane. They are not there collecting dust, but just waiting to go. Destination: mainly Ethiopia, Tanzania, Paraguay and Uruguay. It is the second life of the computers used by Bitcoin miners, computer scientists who, through solving cryptographic puzzles, bring new digital currency onto the market. The exodus of hardware occurs at regular intervals – as mining companies tend to look for increasingly efficient, powerful and above all less energy-intensive equipment – but it intensifies on the occasion of the important four-yearly update in the Bitcoin blockchain.
The record-breaking Bitcoin leads to more mining: there’s a race for supercomputers. And energy consumption soars
by Raffaele Ricciardi
The halving and the effects on Bitcoin mines
Known as halving, the event is expected between the middle and the end of April and represents an important watershed for miners all over the world, which from one day to the next will see the number of cryptocurrencies given to each block reduce by half. Not exactly a note, which justifies the rush of the stars and stripes “mining” giants, you see Marathon Digital Holdings And Riot Platforms, wanting to update their fleet of machines. And quickly too, given that the greatest expense for these companies is given by electricity consumption and with the halving just around the corner it is urgent to make room for computers that allow you to maintain a profit margin. But why throw it all in the garbage, when that same equipment could still bring in a profit?
Direction Africa and South America
The exodus of US computers, recently told by Bloombergwill involve more than 600 thousand S19 series computers in these months alone, the one currently most popular among Bitcoin miners. Africa and South America are the two main landing points, because having lower energy costs they can continue to exploit that hardware and make a profit. L’Ethiopia is becoming one of the main players in the non-US digital mining ecosystem, he told the financial agency Taras Kulyk, CEO of SunnySide Digitala company that manages a warehouse of over 3 thousand square meters full of obsolete machines received from mining customers.
Data centers full of computers have sprung up in the Horn of Africa nation and continue to be exploited to mint new Bitcoins. Miners from around the world travel to these locations, paying a fixed hosting fee that includes electricity and labor costs.
However, the time to make big profits with old computers is coming to an end, because many buyers have already started waiting for May to start spending again, when the “sales” period will arrive. If in 2022 an S19 model was resold for 7 thousand dollars, in 2023 it had gone to 900 dollars and after the halving it is estimated that it will go to 356.
What is halving?
As mentioned, the event called halving should occur within weeks. But what is it? And what are its implications? It all starts with the concept of “scarcity”. When Satoshi Nakamoto created Bitcoin, he also decided to set a maximum limit of circulating units of 21 million, with the clear aim of avoiding devaluation due to the arbitrary issuance of new tokens.
To maintain scarcity, it was then introduced the periodic halving of the creation of new cryptocurrencies. When miners validate a transaction, they receive digital currencies as a reward and this is how new coins are effectively “minted”. At scheduled intervals – precisely every 210 thousand blocks mined (approximately four years) – the size of the reward is halved, hence the term halving.
The first dates back to November 28, 2012, with the transition from 50 to 25 Bitcoins for each new block. On July 9, 2016 the rewards went to 12.5 coins, on May 12, 2020 to 6.25 and this time they will go to 3.125.
The consequences of all this are essentially two and travel in opposite directions. Following the most ancient of economic rules, if supply decreases, the price, especially in times of strong demand like the current one, increases. In the four years following the first halving, Bitcoin recorded a surge of 5,500%, at the end of the second cycle of 1,250% and in March of this year, coincidentally, it reached its all-time high of 74 thousand dollars, pulverizing the previous record of 68,999 last November.
However, the effect on the miners’ balance sheets is different. The decrease in remuneration means putting margins at risk, which is why they are spending exorbitant amounts of money to replace old hardware. It is said that in the last 14 months the main listed mining companies have ordered machines worth over 1 billion dollars.
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