At BTC Inc.’s latest conference, Bitcoin MENA in Abu Dhabi, United Arab Emirates, something was immediately apparent when you entered the expo hall – and it wasn’t just the uncanny mingling of thawb-garbed Arabs with suit-sporting Westerners.
It was that the exhibitor area was thronged with Bitcoin mining companies.
Roughly 40% of the conference’s sponsors and 29% of booth exhibitors were Bitcoin mining companies, BTC Inc. employee Tyler Laroche told Blockspace.
Clearly, bitcoin mining was a huge selling point for the first year conference, and mining companies played no small part in bankrolling the event. Ever since the first large bitcoin mining projects emerged in the United Arab Emirates and Oman, the energy-rich Middle East has been hailed as a region ripe for hashrate expansion.
But deploying mining sites at scale in the Middle East is easier said than done. The baking, desert climate can make operating ASIC hardware a pain, and miners who want to deal in size have to find partners in the government to operate above board. Otherwise, they risk operating in a grey area, if not outright illegally.
The UAE offers cheap power for bitcoin mining – if you can get it
The United Arab Emirates came to the fore in the bitcoin mining world – for Western audiences, at least – in May 2023 when MARA announced its joint venture with Zero Two to develop 250 MW of immersion-cooled bitcoin mining sites in the UAE.
This joint venture was the first publicized effort to build industrial-scale bitcoin mines in a region where retail mining has been popular for years (so much so that there are brick and mortar stores for bitcoin mining hardware). MARA’s partner, Zero Two, is backed by ADQ, a UAE state-owned investment and holding company.
Representatives from companies conducting business in the region told Blockspace that, if a mining firm wants to operate at scale in the UAE, they have to work with government-affiliated entities – otherwise, their access to power will be limited.
“If you’re a miner trying to build out in the region … you have to find a government partner,” Bitdeer Middle East Sales Director Sharif Allayarov told Blockspace. “It’s nearly impossible [for a private miner] to build a farm over 10 megawatts, but the government can get hundreds of megawatts,” he said.
This dynamic has created something of a fragmented bitcoin mining business ecosystem in the region between the haves and havenots, where companies like MARA can access large blocks of power and concentrate their mining operation in a few sites, while other companies operate one to two megawatt sites scattered across the country.
“What you’ll see here in the UAE is tons of operators have ten, twenty sites across the desert,” Emmanuel Monterro, the CEO of UAE-based Terahash Solutions, told Blockspace, speaking to the difficulties miners face when accessing large blocks of power. “You have one megawatt sites, [one and a half], two megawatts, and they’ll have them all across the desert.”
What’s more, the existence of these diffuse operations sometimes belie their legality. As Monterro put it, in the UAE as elsewhere, “there’s wild wild west mining and then there’s professional mining.” And a key draw for the cowboy operators in the UAE is the country’s agricultural electricity rate. Subsidized by the government, this power rate is an incredibly attractive $20/MWh (for reference, industrial-scale miners in the United States may secure power between $40-70/MWh), so naturally bitcoin miners jumped at the chance to tap it.
The only problem is they’re not supposed to access this rate without the government’s blessing, and so many miners started drawing power from this subsidy that the government issued an edict banning them from doing so.
It’s probable that the government still allows MARA to access such a rate, although this is not totally clear. For Monterro’s Terahash Solutions, the edict was enough to make the company shutter its operations in the region, and he told us that it likely impacted the total hashrate operating in the region, even as some smaller miners have opted to stay and stomach the risk of operating in a grey zone. For instance, Allayarov said that the penalty for using this subsidy illegally is not very high, so some miners have continued to do so.
Allayarov went on to say that miners in the UAE will increasingly tap into oil and gas drilling sites that are currently flaring stranded gas.
Operational limits of bitcoin mining in the UAE
If power is one hurdle to clear, then the UAE’s harsh desert climate is another.
Obviously, for a region that can see up to 108 degrees fahrenheit in the peak of the summer, extreme heat can cause operational issues. But this is the least of it – miners also have to battle sand, which can creep into every crevice of their ASICs.
Even so, air-cooled ASICs are still surprisingly common, more so than hydro and immersion, Monterro said. Industrial-scale, professional operations are more likely to use the latter solutions, but the tiny, slipshod, fly-by-night operations scattered across the country that we discussed early are more likely to use air-cooling, he said, in part because they are operating in legal grey area.
“That infrastructure is really poor because people don’t want to take the risk – maybe they get kicked out in a year or two or three. They don’t want to invest so much money into infrastructure,” Monterro said.
Some of these air-cooled facilities use water curtains to create a protective barrier that keeps sand out, but these bring other complications. The precipitant builds up humidity, which can then corrode hashboards. For a country that relies on desalination for 42% of its potable water, H2O is also expensive in the UAE, as Allayarov pointed out, so water curtains add substantially to operating costs.
Closed loop immersion and hydro are the best setups, Allayarov said, adding that Bitdeer is marketing its immersion units in the region.
Beyond the UAE, Oman is #2 in the region for bitcoin mining
During my conversations at Bitcoin MENA, the only country that came up in conversation with substantive bitcoin mining operations was Oman.
The two chief operators of infrastructure in the region are Exahertz and Green Data City. Exahertz opened its first bitcoin mine in the country in August, 2023, and Green Data City opened its doors to mining in the fall of 2022.
Green Data City is something of a novelty. Oman’s Ministry of Transport, Communication, and IT are spearheading the project. The grandiose vision for this so-called smart city entails developing 400 MW of infrastructure for a “sustainable hyperscaler data eco-system,” essentially a company town that would include desalination services, data centers, a cosmetics industry, and all of the hospitality, culinary, and other consumer comforts you would find in a modern “it” city.
The Green Data City already has 200 MW of infrastructure built out, and this is where the bitcoin miners come in. Francesca Failoni, the CFO and co-founder of Alps Blockchain, told Blockspace that Green Data City is hosting bitcoin miners to consume this electricity as the government develops the Green Data City. So far she said, Alps Blockchain has the rights to 150 MW and Phoenix Group, a company traded on the Abu Dhabi stock exchange, has the other 50 MW (although neither company is tapping their entire allotment currently).
Failoni said that the government has only granted two licenses to operate bitcoin mining infrastructure (one to Exahertz, the other for Green Data City), and that there is just under 100 MW of bitcoin mining currently active in the country.
“There are many possibilities to develop other sites, but right now the Sultanate is testing these two projects to see how everything is working, to see if they can energize everything as they declared,” she said, adding that many companies are expressing interest to mine bitcoin in the region.
Alps Blockhain is operating dry-cooled hydro ASIC miners for their deployment, for similar reasons as miners in the UAE. But Foiloni said that the area in which the Green Data City is situated, Salalah, has a microclimate that is much more favorable than the deserts of the UAE. Annual monsoons that blow through the Dhofar mountains create a natural air-conditioning effect that saturates the area with moisture and cooler temperatures. In July and August, for example, temperatures rarely exceed 82 degrees Fahrenheit.
Saudi Arabia, other Middle East countries wait in the wings
As I was wrapping up my conversation with Failoni, a man approached me, having taken interest in the conversation.
His name is Mohammed Alshiekh, a native of Riyadh, Saudia Arabia, and he mentioned that he is working with other companies to lobby the Saudia Arabian government to open up business opportunities for bitcoin mining. As with the UAE and Oman, miners will need the government’s blessing before they can operate large sites in the region.
As such, Alshiekh said that the only bitcoin mining in the country right now occurs in the comfort of peoples’ homes.
Should Saudi and other newly-wealthy countries like Qatar open their doors to bitcoin mining, then we could see hashrate expansion still in the region.
Header photo by by ZQ Lee via Unsplash
