Bitdeer has announced that a 100 MW mining datacenter located at Gedu, of which DHI is a strategic partner, will start mining operations by this month.
Linghui Kong, Chief Executive Officer of Bitdeer made the announcement on Yahoo Finance News.
Around 10,000 mining machines arrived at the Gedu datacenter by the end of June 2023 and another 22,000 machines are in transit to the site and will be there by this month.
This the first project of the USD 500 million fund partnership between Druk Holding & Investments (DHI), the commercial arm of the Royal Government of Bhutan and Bitdeer Technologies Group a world-leading, Nasdaq-listed technology company for the crypto currency mining community.
The partnership had been announced on 3 May 2023 and fundraising for the fund started by the end of May 2023.
Bitdeer will have invested under USD 80 mn in the Gedu mine as the machines cost around USD 60 mn and there would be other setting up expenses.
A DHI official said that for Bhutan this is a low risk project as the funds are being entirely raised by Bitdeer.
Bhutan provides the land, policy support and most importantly the power. In return Bhutan will get a share of the revenue made by Bitdeer, it will sell power at very competitive rates in USD to the project, it will earn tax revenue in USD from the project and direct employment will be created for local Bhutanese of around 25 to 30 direct jobs and many more indirect jobs.
A big plus will also be the foreign currency earnings.
Once fully up, the Gedu mine with its 30,000 machines is expected to mine around 10 Bitcoins in a day which with the current market value will be around USD 30,000 plus for each coin and a total value of USD 300,000 plus a day and around USD 9 mn a month.
The overall total project size with Bitdeer will be 600 MW. With the 100 MW almost done this leaves another 500 MW of projects which will be done over the next two years in one or two other locations.
Here too, the arrangement will be the same with Bitdeer raising the money and supplying the machines and Bhutan getting a share of the revenue, tax revenue, electricity sale etc.
The DHI official emphasized that the USD 500 mn projects coming to 600 MW of mines with Bitdeer is a strategic partnership and is separate from DHI’s own Special Projects or Bitcoin datacenters which have been already mining and generating Bitcoins for a few years.
They are located in a couple of locations and DHI will not be building anymore for now.
The DHI Special Projects has started selling Bitcoins to finance the civil service pay hike which is effective from 31 July 2023. The civil service hike costs around Nu 6 bn a year and Nu 12 bn for two years. DHI will give Nu 4 bn a year or Nu 8 bn over two years for the salary hike until Punatsangchu II comes online.
This is a good time to sell too as Bitcoin prices made a major recovery when it started at USD 16,625 on 1st January 2023 and made a bullish recovery in the following months to hover around USD 30,000 plus currently.
Meanwhile, an 8 July 2023 a Fortune magazine article had said that around half the Bitcoin miners will suffer due to less efficient mining operations once the April 2024 halving takes place that will cut miners rewards from 6.25 Bitcoins per block mined to 3.125 Bitcoins.
This four yearly event halves the numbers of Bitcoins given as rewards.
In the past halving events in 2012, 2016 and 2020 has seen Bitcoin jump in value by 8,450%, 290% and 560% according to Bloomberg.
The expectation is that the halving will be more than made up by the increase in value of Bitcoins as they become more difficult to get.
The DHI official said that the 2024 halving will be the fourth halving and so far none of the miners have gone out in the past halvings.
The main premise of the Fortune magazine article saying that around half the miners will have a tough time after the halving is due to power costs versus the numbers of coins.
However, here Bhutan has a unique advantage as it has one of the cheapest power rates in the world.
In April 2023 DHI said that it has been mining Bitcoin for a few years and it had entered the space when the price of Bitcoin was around USD 5,000.
While DHI is selling Bitcoins to finance the civil service pay hike for two years and also run the costs of its own Bitcoin mining projects (different from Bitdeer) it is saving some Bitcoins for when a major spike in the value of Bitcoin is expected after the April 2024 halving.
DHI running its own special projects on Bitcoin mining and the separate USD 500 mn deal with Bitdeer shows that Bhutan is capable of handling large foreign investments by delivering on its end of the bargain.