Empowering Communities with Bitcoin Mining — the Gridless Case

5 min readJan 7, 2024

L’articolo è disponibile anche in italiano.

Introduction

In 2023 we witnessed a profound shift in the mainstream narrative surrounding Bitcoin mining. Mining has long been associated by the mainstream media with pollution, energy waste, and even energy theft (due to agreements between miners and energy providers). However, thanks to the work of prominent Bitcoin mining advocates and environmentalists like Daniel Batten (and the “sudden” interest in Bitcoin shown by financial firms like Blackrock and Fidelity), in 2023 mainstream media started discussing Bitcoin mining’s positive externalities and explaining why it will play a crucial role in our transition to an economy based on renewables.

In this article I would like to talk about a Bitcoin mining project that I find particularly fascinating because it shows really well how Bitcoin mining can improve lives (especially in emerging markets), help the transition to a green economy, and further decentralize the network.

Gridless: At the Frontier of Bitcoin Mining in Africa

Gridless is a Bitcoin mining company based in Kenya that focuses on the development of mini grids in small and isolated rural communities. As they clearly explain in this article, in order for villages, cities and countries to participate in the 21st-century economy, it’s essential they have access to electricity and to the Internet. Think about the difference this can make: by having access to electricity and the Internet, people and entrepreneurs can start using electronic devices and be connected to the whole world to learn and share ideas, products and services. Moreover, electricity also instantly improves the quality of life: imagine you’re living isolated from a major city and the main energy grid, and you have to stop working really early because you don’t have proper lighting, and it becomes even dangerous to go outside. Imagine not being able to use all common devices and appliances we are lucky to have as commodities in the West, which would help people be more productive and save a ton of time and energy they could use for other projects.

While short-sighted environmentalists in the West would want us to consume less and use less energy, it is very clear that energy consumption goes hand in hand with prosperity and is essential for any civilization to progress. However, the challenge is developing better forms of energy that we can use while minimizing our impact on the environment.

Africa is a continent that is notoriously rich in natural resources and renewables, yet around 600 million people in sub-saharan Africa don’t have access to electricity according to the Alliance for Rural Electrification. But if these areas share a lot of potential for energy production, why is that? Well, as always, it’s a matter of money.

Gridless focuses on small and isolated rural communities that cannot be connected to the main grid. They may have the resources to produce energy on their own, but the main problem is that the demand would be too low to justify the investment to build a mini grid. Or, the price they would have to pay for the electricity would be too high. Additionally, these production sites would also have a hard time scaling their production: even if provided with affordable electricity, it would take time for these communities to start using electronic devices and appliances to an extent that justifies further investments to increase energy production. This problem is commonly known in the startup world as Death Valley Curve.

How Bitcoin fixes this

We have now understood that the main problem these mini grids face is the lack of demand. And here is where Gridless comes in. As we know, Bitcoin mining is constantly using energy and miners are incentivized to look for the cheapest source of energy available on the market. Therefore, miners can act as buyers of last resort and help the development of mini grids. Thanks to Bitcoin mining, grid companies know that they will always have very high demand for the energy they produce. Also, this demand is extremely flexible, because miners can switch off their ASICs in a second in case the demand suddenly spikes. What Gridless does is use the excess energy produced by these mini grids to mine bitcoin. Given that this energy would otherwise be wasted, they can negotiate with the providers and obtain an extremely competitive price. They could even get the energy for free and redistribute some of the revenue obtained through mining.

“There’s 600 million people in Africa that don’t have access to electricity. That’s a lot. That’s two-thirds of the world’s total that don’t have access to electricity that’s here. And so what we all should be trying to do is focus on how can we help electricity proliferate across this continent. Bitcoin mining just happens to be the missing link.” — Erik Hersman, co-founder of Gridless, on the What Bitcoin Did podcast

Everyone benefits from this:

Energy providers: they know that they will always sell all the energy they produce. This very high and constant demand allows them to plan ahead and scale much more quickly. Also, they are incentivized to scale and produce more, because they will make more money.

Communities: all of a sudden, these isolated communities where Gridless is active will have access to affordable and clean energy, which will improve their quality of life significantly given that they will be able to abandon other dangerous and polluting forms of energy like kerosene, use electronic devices, tools and appliances, and improve the lighting system.

Miners: miners will have an extremely cheap and constant supply of energy they can use to mine bitcoin to maximize their profits.

Bitcoin network: Gridless’ business model also helps further decentralize the mining network across the globe. Africa is still underrepresented in the mining industry, and by developing mini grids in isolated communities the network gets stronger and more resilient. In 2023, Gridless worked on 6 mining sites across 3 countries (Kenya, Malawi and Zambia) and helped develop hydro, geothermal, biomass and solar energy.

Conclusion

Gridless is just an example of the positive impact Bitcoin mining can have on communities all around the world. Thanks to its incentive mechanism, Bitcoin mining is arguably the best tool we have to transition to a green economy without cutting our energy consumption and regressing as a society. Because incentives are perfectly aligned, everyone can act out of self-interest and this will incentivize the production of clean energy in the whole world, without relying on government subsidies. As far as I am concerned, Bitcoin mining’s positive externalities are one of the most fascinating aspects of this technology, also because I cannot believe Satoshi had already envisioned them. And the next time you hear somebody say that Bitcoin mining consumes too much energy and it should switch to proof of stake, show them this article!

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