Why Nigeria won’t be a crypto mining hub

Dec 20, 2021|Noelle Okwedy

Lately, the Stears Business newsroom has been having riveting conversations about decentralised finance and the metaverse.

It’s hard not to get sucked into these conversations when you hear stories about people buying virtual real estate for millions of dollars in the metaverse. From concert venues to shopping malls, investors are snapping up virtual property in the metaverse to rent them out.

Some takeaways:

Mining bitcoin requires significant energy and consumes more electricity in a year than what countries like the United Arab Emirates and Argentina would consume in the same period.
Because most of the electricity in countries where mining takes place is generated from fossil fuels, bitcoin has a high carbon footprint.
But as renewable energy sources become cost-competitive with fossil fuels, miners are migrating to places with cheap renewable energy sources.

While discussing the story, Fadekemi, our Editor-in-Chief, made a statement that got me thinking. She said it was funny that even in the metaverse, the tenets of capitalism are still upheld—people will always find ways to maximise profits. And so, just as there’s a housing bubble in the real world, we see a similar situation forming in the metaverse because of surging demand. We’re quickly learning that the world’s problems won’t disappear just because you decide to create a virtual version of it. A similar scenario applies to cryptocurrencies like bitcoin.

Bitcoin is supposed to be more efficient given that it eliminates the need for a centralised exchange like a government. But, in some ways, bitcoin still has the same issues as fiat currency, specifically regarding energy use and carbon footprint. Even though fiat money systems use over four times as much energy as bitcoin mining, bitcoin still consumes more electricity annually than entire countries like the United Arab Emirates and Argentina. So much for decentralisation leading to greater efficiency.

There’s a potential solution—powering bitcoin mining with clean energy. However, we need to understand why Bitcoin’s energy use is so concerning.

Bitcoin’s carbon footprint

Bitcoin consumes a lot of energy because it is produced through virtual mining. In a previous article, we unpacked why it would be almost impossible to mine bitcoin in Nigeria. The primary reason is how much energy it consumes and how little energy Nigeria has.

Bitcoin’s mining protocol is called proof of work, and it involves the use of high-energy consuming supercomputers