Jack Dorseys Block Backs Bitcoin Mining Company Bringing Affordable Electricity to Africa

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The three co-founders of Gridless at one of their mining sites in Kenya.

Erik Hersman

ACCRA, GHANA Until February, Janet Maingi didn’t think much about bitcoin. Born and raised in the Kenyan capital of Nairobi, Maingi had instead spent more than twenty years trying to solve one of Africa’s biggest problems: connectivity. To that end, she has spent more than 20 years working in the operations of the telecommunications industry, in companies specializing in Internet and wireless networks to cable and satellite television. But earlier this year, the 45-year-old mother decided to tackle the continent’s second biggest problem: its energy problem.

Africa is the Mecca of renewable energies. There is about 10 terawatts of solar capacity, 350 gigawatts of hydropower and an additional 110 gigawatts of wind power, according to data from Energy, Capital & Power, an investment platform focused on Africa’s energy sector.

Some of this renewable energy is already being harnessed, but much of it is not because it is expensive to build the kind of specialized infrastructure needed to capture it. Even though Africa has 60% of the best solar resources in the world, the continent has only 1% of installed solar photovoltaic capacity, according to the International Energy Agency.

“When you sit down and look at rural Africa and rural Kenya, one of the things that prevails in the homes that I talk about, the 50% that are not electrified, is that the children have to do their homework using either kerosene lamps or candles,” Maingi told CNBC on the sidelines of the Africa Bitcoin conference in Accra.

“Think about their eyesight, think about their health,” she said.

Without grid

Maingi was frustrated with the gap between generation and capacity, given that 43% of Africa’s population, or 600 million people, do not have access to electricity. So, in February, she started spitting out creative solutions with two friends, and all three landed on some sort of counterintuitive idea: bitcoin mining.

Mining the world’s largest cryptocurrency is a process known as proof of work. Miners around the world use powerful computers that collectively validate transactions and simultaneously create new tokens. The process requires a lot of electricity, and since this is the only variable cost in a low-margin industry, miners tend to seek out the cheapest power sources in the world.

Philip Walton, co-founder and CFO of Gridless, sets up a mini-grid hydroelectric site to operate with 20 kilowatts of electricity in Kenya.

Erik Hersman

Bitcoin has a bad reputation for the amount of energy it consumes, but it can also help unlock these trapped renewable energy sources. Bitcoin miners are essentially buyers of energy, and when they co-locate with renewables, it creates a financial incentive for construction and improves the basic economics of renewable energy generation. The IEA says that in rural areas “where more than 80% of people are without electricity, mini-grids and stand-alone systems, mostly solar, are the most viable solutions.”

In May, Maingi and his two colleagues decided to try it. They founded a company called Gridless to see if the additional demand from bitcoin miners on these semi-secured assets could make renewable energy in Africa economically viable and, importantly, if the additional source of energy could power communities previously out of reach. reach of micro-grids that electrify parts of Africa.

Gridless also plans to expand to other parts of Africa with a further injection of cash.

Jack Dorsey’s digital payments firm Block and Alyse Killeen’s bitcoin-focused venture capital firm Stillmark led a $2 million seed investment in the company, which Gridless says it plans to grow. use to open new mines.

Maingi is the chief operating officer, and her two friends-turned-co-founders, chief executive Erik Hersman and chief financial officer Philip Walton, have spent the past few months launching pilots across Kenya in which they are working with hydro mini-grids and solar generators. to use their excess capacity to operate.

“We’ve spent years building internet connectivity infrastructure in rural and urban Africa, and we’ve realized that you can’t have a 21st century economy without electricity and connectivity together,” Hersman told CNBC.

The new 533 kilowatt site in Kenya where 300 kilowatts will be used for bitcoin mining.

Erik Hersman

“As we looked at the next problem to solve, we realized that bitcoin mining solves a major problem for mini-grid renewable energy developers, in that we could be their industrial buyer for electricity. blocked no matter where they were, making electrification more sustainable and growing across Africa,” Hersman continued.

Gridless currently has three operational pilot sites in Murang’a, a rural town 90 minutes’ drive northeast of Nairobi. Each mine runs on hydroelectric power from HydroBox, a mainland-based energy company. Two of the mines have a capacity of around 50 kilowatts and by Thursday the third mine will increase to 300 kilowatts.

To put those numbers into perspective, 30 kilowatts would power about 500 homes. 50 kilowatts is closer to 800 homes.

In January, Gridless plans to launch another 50 kilowatt hydroelectric mine in Malawi and its first solar-powered site in West Africa which will have a capacity of 30 kilowatts.

Reduced energy costs

So far, the economy makes a lot of sense for everyone involved. Gridless serves as an anchor tenant of sorts. The company finances the construction and manages the operation of data centers in rural communities where traditional industrial or commercial customers are not available, according to a company statement released Tuesday.

Gridless launches a new solar-powered mine in January 2023 in West Africa.

Erik Hersman

Since the electricity supplier benefits from the sale of energy that was previously rejected, power plants will sometimes reduce costs for the end user. At one of their pilot sites in Kenya, for example, the hydropower plant has brought the price of electricity down from 35 cents per kilowatt hour to 25 cents.

Capacity building also electrifies households. Gridless says they have already seen this translate into containerized cold storage for local farmers, battery charging stations for electric motorcycles and public WiFi hotspots.

Once these types of needs are met, Gridless said in a statement that the remaining power capacity is used to power the bitcoin mine.

“Bitcoin and mining is really the tool. We don’t make bitcoin for bitcoin’s sake,” Block’s head of bitcoin mining and wallet Thomas Templeton said. “The whole goal is really to empower these villages. Bitcoin is a way to do that.”

Block previously announced in April that it would partner with Blockstream to inaugurate a solar- and battery-powered bitcoin mine in Texas that uses Tesla’s solar and storage technology.

Block is also working on a project to make bitcoin mining more distributed and efficient.

According to Templeton, making the mining process more accessible isn’t just about creating new bitcoins. Instead, he says the company sees a long-term need for a fully decentralized, permissionless future.

The company solves a major barrier to entry: mining rigs are hard to find, expensive, and delivery can be unpredictable. Block says he plans to create a new ASIC, which is the specialized equipment used to mine bitcoin.

Democratizing access to the mining process is important to Block. Currently, Africa accounts for around 0.2% of the global bitcoin hashrate (an industry term used to describe the collective computing power of the entire network), according to the Cambridge Center for Alternative Finance. Most hash power has shifted from China to the United States over the past 18 months after Beijing banned crypto mining. Many industry players tell CNBC that this kind of centralization is a problem.

“Decentralized mining is essential for bitcoin’s resilience,” said Templeton, who added that Block launched its mining initiative to make mining more accessible, user-friendly and reliable, so that more people can exploit.

It was a sentiment shared by Dorsey in Accra on Tuesday morning. Block’s CEO, who said he still plans to move to Africa for six months, added that Block wants to partner with other companies on the continent to make it easier for people to get into bitcoin.

“We are working on a hardware miner to hopefully make it more accessible and efficient for people around the world and especially on the continent to help secure the network and make it even more resilient in the form of something that’s also useful for other things, not just mining.”

Supporting the boom in bitcoin mining across Africa also translates into another big goal for Block: to help accelerate global renewable hashrate.

“Gridless represents a close strategic alignment with our vision to ensure the bitcoin network increasingly leverages clean energy, in combination with bitcoin computing centers around the world,” Templeton said.

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