Jack Dorsey’s Block is backing a bitcoin mining company bringing affordable electricity to Africa

ACCRA, GHANA – Until February, Janet Maingi didn’t think much of it bitcoin. Born and raised in Nairobi, Kenya, Maingi has instead spent more than two decades trying to solve one of Africa’s biggest challenges: connectivity. To that end, he has worked for more than 20 years in the telecommunications industry, specializing in companies ranging from Internet and wireless networks to cable and satellite television. But earlier this year, the 45-year-old decided to take on the continent’s second-biggest energy challenge.

Africa is the mecca of renewable energy. There are about 10 terawatts of solar capacity, 350 gigawatts of hydro and another 110 gigawatts of wind, according to Energy, Capital & Power, an investment platform focused on Africa’s energy sector.

Some of this renewable energy is already being used, but much is not, because it is expensive to build the special infrastructure needed to capture it. According to the International Energy Agency, although Africa has 60% of the best solar resources globally, the continent has only 1% of installed solar PV capacity.

“When you sit back and look at rural Africa and rural Kenya, one of the things that is very common in homes – I’m talking about the 50% that are not electrified – is that children do their chores using either paraffin lamps or candles,” Maingi told CNBC on the sidelines of the African Bitcoin Conference in Accra.

“Think about their vision, think about their health,” he said.

Considering that 43% of Africa’s population, or 600 million people, do not have access to electricity, Maingi was frustrated by the gap between production and power. So, in February, he and two friends started brainstorming creative solutions, and the three hit on a kind of counterintuitive idea: bitcoin mining.

Mining for the world’s largest cryptocurrency is a process known as proof-of-work. Miners around the world run high-powered computers that collectively validate transactions and generate new tokens at the same time. 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 world’s lowest-cost energy sources.

Bitcoin is notorious for the amount of energy it consumes, but it can also help unlock these capped renewable energy sources. Bitcoin miners are essentially energy buyers, and when they are co-located with renewable energy sources, they create a financial incentive for construction and improve the underlying economics of renewable energy production. “In rural areas, where more than 80% of those without electricity live, mini-grids and stand-alone systems, mainly based on solar energy, are the most appropriate solutions,” the IEA says.

By May, Maingi and two of his colleagues decided to give it a try. They founded a venture called Gridless to study whether additional demand from bitcoin miners for these semi-capable assets could make renewable energy sources in Africa economically viable, and more importantly, if the additional energy source could power communities previously out of reach of microgrids that electrify parts. From Africa.

Gridless also has plans to expand to other parts of Africa with the help of the new cash.

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

Maingi is chief operating officer, and two of his friends-turned-co-founders, CEO Eric Hersman and CFO Philip Walton, have spent the past few months launching pilots in Kenya with mini-grid hydro and solar generators. to use excess capacity to produce.

“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 both power and connectivity,” Hersman told CNBC.

“When we looked at the next problem to be solved, we realized that bitcoin mining solved a big problem for renewable mini-electricity producers, so we could be an offshoot of their industrial energy, no matter where they are located. making them more sustainable and increasing electrification in Africa,” Hersman continued.

Gridless currently has three operational pilot sites in Murang’a, a rural town 90 minutes northeast of Nairobi. Each mine is powered by hydroelectric power from HydroBox, an energy company based on the continent. Two of the mines have a capacity of about 50 kilowatts, and the third mine will expand to 300 kilowatts by Thursday.

To put these numbers into perspective, 30 kilowatts can power about 500 households. 50 kilowatts is close to 800 families.

In January, Gridless plans to launch another 50-kilowatt hydrofarm in Malawi and its first 30-kilowatt solar facility in West Africa.

By now, the economy makes a lot of sense to everyone. Gridless serves as a sort of anchor tenant. The company finances and operates data centers in rural communities where traditional industrial or commercial customers are not available, according to a company statement released Tuesday.

Power plants will sometimes reduce costs for the end user as the energy supplier benefits from the sale of previously discarded energy. For example, at one of the pilot sites in Kenya, a hydro plant reduced the cost of electricity from 35 cents to 25 cents per kilowatt hour.

Increasing power also electrifies households. Gridless says they’ve already seen it turn into containerized cold storage for local farmers, battery charging stations for electric motorcycles and public WiFi hotspots.

After these types of needs are met, Gridless said in a statement, the remaining electricity is used to power bitcoin mining.

“Bitcoin and mining is really a tool. We don’t do bitcoin for bitcoin’s sake,” said Thomas Templeton, bitcoin mining and wallet lead at Block. “The whole goal is really to empower these villages. Bitcoin is a means to that end.”

Block previously announced in April that it would be working with Blockstream on a solar and battery-powered bitcoin mine in Texas that uses solar power and storage technology. Tesla.

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

According to Templeton, making mining more accessible is about more than creating new bitcoins. Instead, he says the company sees it as a long-term need for a fully decentralized and permissionless future.

The company addresses a major barrier to entry: mining rigs are hard to find, expensive, and delivery can be unpredictable. Block said he plans to develop a new ASIC, the special gear used to mine bitcoins.

Democratizing access to the mining process is huge for Block. Currently, Africa accounts for about 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. Over the past 18 months, a large amount of hashpower has moved from China to the United States, following Beijing’s ban on cryptocurrency production. Many in the industry tell CNBC that such centralization is a problem.

“Decentralized mining is essential to bitcoin’s sustainability,” Templeton said, adding that Block was launched to make the mining initiative more accessible, user-friendly and reliable so that more people could mine.

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

“We’re working on a hardware miner to make it more, hopefully, more accessible and more efficient for people around the world, and especially on the continent, to participate in securing the network and make it more sustainable in the form of something more useful. for other things, not just mining.

Supporting the rise of bitcoin mining in Africa becomes another big goal for Block: Helping accelerate a global renewable hashrate.

“Gridless represents a close strategic fit with our vision to enable the bitcoin network to increasingly use clean energy in conjunction with bitcoin computing centers around the world,” Templeton said.