770 million people in the world don’t have access to electricity. Many of them are on the African continent.
In rural Africa there are at least two reasons for this: lack of disposable income and lack of infrastructure. Of the former, Africans might have access to electricity but may choose instead to ration funds for other things, like once-weekly mobile data on their smartphones. Of the latter, electrical grids in urban areas fail to reach the rural populace.
This effectively strands rural areas on a proverbial island from the main grid. Africans have adapted so-called microgrids to provide electricity instead. A microgrid is an electrical grid that contains both the generation and storage of energy and distributes it to the immediate surrounding area. As the name implies, the reach of these microgrids is small.
Microgrids to power rural Africa have been in use for years, but there are issues. One of the issues stems from funding. Microgrids are funded through concessionary funds from government agencies such as USAID to get off the ground. Once launched, microgrids struggle to remain financially sustainable. Further microgrids are inefficient and can let off a meaningful amount of generated electricity as waste heat that no one captures or uses.
What rural Africa – and other rural areas in the world – need is the expansion of the main electrical grid, not innumerable microgrids that create waste and inefficiencies.
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The idea: Gridless
Erik Hersman grew up in Kenya and South Sudan. He is hyper-focused on bringing valuable businesses to Africa. During an interview with CoinDesk he gave a nod to the community-oriented attitude most Africans exhibit because, in his experience, people tend to do things together rather than alone. One of his more interesting viewpoints is rooted in entrepreneurship.
“If you want to make your dent in the world, it is really about wealth generation and building businesses that change people’s lives … because being treated as an equal is a hell of a lot better than being treated as a recipient with your begging bowl out,” Hersman said.
Hersman’s parents were missionary linguists who moved to Africa before Hersman was born. Hersman grew up watching development and aid in Africa bring hope followed by disappointment, the cycle repeating over and over again. So when he returned to the continent after college in the United States, he avoided going into development, as so many college graduates do.
And then, in March 2022, he started Gridless with his two co-founders.
Gridless wasn’t born with a focus on bringing bitcoin mining to rural Africans. The company’s main aim was to offer affordable energy through microgrids. Bitcoin just uniquely enabled that capability. Bitcoin mining, the process in which bitcoin transactions are added to its ledger and how new bitcoins are minted, is immensely useful to Gridless because it is geography agnostic – unlike say precious metals mining where operations need to be set up where the precious metal exists.
To mine bitcoin, all you need is access to energy and the internet. And rural Africa has both.
The trick is that capturing potential energy, through something like a hydroelectric dam on a river, takes initial capital investment to set up and needs consistent energy demand from the community to remain financially viable. The bridge to financial viability is provided by Gridless. Gridless partners with an energy producer to co-locate a bitcoin mining operation with the production point of a microgrid near a rural community. Whatever electricity isn’t purchased by the community is used for mining bitcoin. The mined bitcoin represents the microgrid’s path to profitability.
That community now has access to electricity and the energy producer can turn a profit thanks to bitcoin mining.
But with Bitcoin as part of its business plan, Gridless has two goals: help push the value of electrification in Africa further to the rural edges and provide more decentralization to the Bitcoin network. To achieve these goals Gridless designs, builds and operates bitcoin mining sites alongside small-scale renewable energy producers in rural Africa. These areas tend to have immense amounts of potential and stranded energy.
Gridless was thrust into the Bitcoin Twitter limelight after Luxor CEO Nick Hansen shared a video in October of one of Gridless’ micro-hydroelectric plants in rural Kenya.
This hydroelectric plant will be able to provide affordable electricity to the neighboring village and is unobtrusive to the surrounding ecology. Gridless is able to do this because whatever electricity the village doesn’t use will be used for mining bitcoin. The cost of the energy paid to mine the bitcoin will more than offset any losses associated with providing the electricity to the village since instead of being wasted, it will actually be used.
So while a mainline criticism of bitcoin is that it requires too much electricity to work, here’s a tangible example of a rural community enjoying access to electricity because of bitcoin mining. These Kenyans now have access to electricity because of bitcoin, not in spite of bitcoin. Gridless is cutting into that 770 million without electrical power one bitcoin-enabled microgrid at a time.
As for the environmental concern associated with bitcoin mining’s dependence on energy that’s often repeated, providing access to electricity where it wasn’t possible before should surely outweigh whatever moral weighing a critic has for green energy production. Besides, hydroelectric power is renewable.
And there’s more to come. Gridless is focused on building out facilities in Kenya and Malawi, especially now that Gridless has fresh capital to work with. Hersman shared that Gridless had purchased “bucketloads of mining machines” with $3 million of seed funds raised from Jack Dorsey-founded Block and bitcoin venture capital firm Stillmark in December.
Environment risks, just not the ones you think
Gridless has immense promise and lofty goals, but they have been brought down to Earth recently. While political risk and site security risk is casually viewed as threats to the business, Hersman said that “environmental risk is more pertinent than any other risk.”
And he doesn’t mean the type of environmental risk that is most often discussed. It’s not the “Bitcoin is bad for the environment” risk but rather “rains are at 40-year lows in Kenya so hydroelectric generation isn’t as fruitful as anticipated” risk.
As for competitors, as ridiculous as it sounds, Gridless doesn’t really have any pure competitors at the moment. Sure, there are microgrid providers in Africa and, yes, there are companies and individuals mining bitcoin in Africa, but as for someone doing both? Gridless stands somewhat alone at the moment.
Competitors that do the same thing could crop up, of course, and they very well might if Gridless is successful. While increased competition would create a tougher environment for Gridless to thrive, there are at least two concessions.
First, Africa is a continent (one of the largest), so there is plenty of room for other entrepreneurs to thrive and push the benefits of electrification to more and more Africans. Second, more bitcoin mining companies should mean more bitcoin mining decentralization.
Both of these concessions align perfectly with Gridless’ goals.
CORRECTION (April 18, 2023, 18:28 UTC): A seed investor in Gridless was misidentified in a previous version of this story. The correct investor is Block, a company founded by Jack Dorsey.
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