Experts explain the specifics of mining in the UAE

UAE generates about 3.7% of the global Bitcoin hashrate and is the fastest-growing mining centre in the Middle East. Luxor’s experts arrived at this выводу.

Analyst Jaran Mellrud and client-relations manager Eric Vera, in the course of the study, estimated the capacity involved in mining the first cryptocurrency at about 400 MW.

With an average device efficiency of 30 J/TH, miners in the UAE should generate 13 EH/s. The figure surpasses the performance of all other countries in the region, the experts noted.

According to them, mining in the Emirates had already existed for several years in the form of small farms or installations located in homes. The rapid growth of the industry began in recent years with the support of Abu Dhabi’s sovereign wealth fund’s digital assets division.

At the end of 2021, Zero Two (then named FS Innovation) in partnership with local Phoenix Technology built a mining farm with a capacity of 650 MW, with hydro cooling.

In February 2023, the fund’s division created a second joint venture — with American Marathon Digital Holdings. As part of the partnership, the companies will build in Abu Dhabi two facilities with immersion cooling totaling 250 MW.

«Thus, all large-scale projects in the UAE were led by Abu Dhabi’s sovereign wealth fund in partnership with recognised industry players. Moreover, almost all mining in the country takes place in this emirate, the largest and most energy-rich,” the experts stressed.

In their view, a number of factors could spur further growth in Bitcoin mining in the UAE:

• government support;
• surplus electricity;
• availability of capital;
• political stability and a favourable business environment.

However, Mellrud and Vera also pointed to the main obstacle to the development of mining operations in the country—the climate. The average daytime temperature ranges from 24°C in January to 42°C in August, with frequent peaks above 50°C.

This forces the use of water or immersion cooling and raises costs. In Abu Dhabi, desalinated seawater is used, the impact of which on miners has yet to be studied, the experts noted. To cool the immersion fluid, compressors must be used, increasing energy consumption. Yet such solutions were named by the experts as the most promising under UAE conditions.

Heat is not the only adverse factor for mining in the UAE. The enormous quantity of dust and periodic sandstorms pose a serious problem. These factors reduce the lifespan of equipment. Mellrud and Vera again regard immersion cooling as the best option to protect the installations.

Luxor’s specialists also drew attention to the opacity of energy tariffs. With subsidised electricity for residents ($0.02 per kWh) or agricultural holdings ($0.012 per kWh), industrial users pay $0.073–$0.099 per kWh. This is a very high cost for mining, and as a result, existing data centres must enter into certain arrangements, the experts stressed. In their view, Marathon would not have started operations in the country at a tariff above $0.045 per kWh.

«The UAE is set to become an increasingly important country for Bitcoin mining over the next few years and could serve as a model for other Middle Eastern countries,» the experts concluded.

In April, the UAE’s Securities and Commodities Authority began licensing crypto-service providers.

Binance called the country a ‘key point’ for its business. Coinbase is considering the jurisdiction as a strategic hub for overseas expansion.