Crypto miners see ‘enormous potential’ in the Gulf

Alamy via Reuters

• Crypto miners drawn to Gulf
• Electricity is 80% of cost
• Tech-savvy population

With cryptocurrencies edging up again after last weekend’s “halving” – in which the rewards Bitcoin miners get for solving problems is cut in two to maintain scarcity – these are heady days for holders of Bitcoin and other virtual currencies.

Bitcoin miners have been attracted to the Gulf by cheap electricity and established infrastructure.  

“GCC countries have enormous potential in relation to the development of the Bitcoin mining sector,” Abdumalik Mirakhmedov, executive president of Dubai-based Bitcoin miner GDA, told AGBI. “In the past year, the region has been experiencing active growth, with several significant launches.”

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Bitcoin “mining” is a process in which information in a blockchain block is validated by specialist machines. When a complex solution is reached by this equipment, a reward – in the form of Bitcoin and fees for the work done – is then issued.

Initially, mining was often done in back rooms and sometimes-unofficial data centres. These days, however, it is increasingly dominated by larger businesses.

This equipment, however, also requires a lot of electricity. 

In 2023, the Cambridge Bitcoin Electricity Consumption Index (CBECI) estimated global electricity usage associated with Bitcoin mining to be around 120 terawatt hours – about the same as Australia’s total electricity consumption that year.

Working day and night, Bitcoin miners also generate a lot of heat. 

In colder climates, this has sometimes been repurposed to provide heating. 

In the Gulf, however, the heat creates even greater electricity consumption, as powered cooling systems are used to keep the machinery within its operational temperature range.

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A further problem in the Gulf recently has often been the lack of a clear regulatory framework for the industry – sometimes because of a general suspicion of cryptocurrencies. 

Kuwait, for example, has banned all virtual asset transactions, investments and mining. In Saudi Arabia and Qatar, crypto has only quasi-legal status.

Yet, despite the obstacles, “the GCC region is the world’s sixth-largest adopter,” said Paige Aarhus, Paris-based director of crypto news and analysis site DL News.

And figures from Chainalysis, a US-based cryptocurrency software development company, estimate that total crypto transaction levels in Saudi Arabia alone amounted to $36 billion and in the first two months of 2024 it hit $6 billion.

In the UAE and Oman, too, a more positive approach has been taken. 

A regulatory framework has been established, enabling facilities such as the DMCC Crypto Centre in Dubai to provide a wide range of services, including mining. 

In Oman, $800 million is now invested in crypto mining in the Sultanate.

Abu Dhabi’s Green Data City in Salalah was Oman’s first licensed mining entity, while Exahertz International has also now joined it in the southern – and slightly cooler – Omani city.

Power plays

With electricity representing around 75-80 percent of a data farm’s average cost, cheap power is a major draw for miners when it comes to the Gulf.

In Oman, although subsidies for electricity are being phased out, typical costs remain at around $0.05 per kilowatt – much less than the US average of $0.23, which is itself lower than average tariffs in Europe. 

“Innovations such as liquid cooling and immersion cooling are expected to significantly contribute to the expansion of operations within the region,” says Mirakhmedov. 

This was recognised at the recent Global Digital Mining Summit hosted by mining server manufacturer Bitmain, held in Muscat. The “Hydro-mining Wins in the Desert” gathering highlighted progress in water cooling.

Green, renewable energy from solar is also available in abundance in Oman and other Gulf countries, providing miners with more sustainable credentials.

At the same time, the Gulf offers a developed infrastructure and few restrictions on land for large data farms. 

Oman, and other Gulf states, have also all invested heavily in education and training in IT, producing large, tech-savvy populations.

“Key benefits of the Gulf also include the region’s access to capital and the ease of doing business,” says Mirakhmedov. 

These benefits may help Gulf miners weather the storm of the recent halving.

Larger mining companies, or groups of miners, stand a better chance of absorbing that loss, while “some smaller mining companies may well go out of business as a result,” Aarhus says.

With miners in the Gulf generally larger operations with lower overall costs, they may now be well placed for further expansion. More data farms could therefore be springing up around the region, in the months to come.