MIT Feature: Why Bitcoin is the Savior of Congo National Park

In eastern Congo, AK-47 rifles, old Soviet-era weapons that sell for as little as $40 on the black market, are used by militias to seize land, timber, ivory and rare minerals that have long been the region’s hope and curse.

But the man in military uniform was no militiaman. He was one of the few authority figures in this largely lawless region: a ranger who normally patrols Virunga National Park, an area best known for its endangered mountain gorillas.

But today, his job is different. In Luviro, a small village outside the park, he is watching over the world's first Bitcoin mine operated by a national park and powered by clean energy. It's a gamble that has excited many people who work in and around the park, but also attracted skepticism from experts who wonder what cryptocurrency has to do with protecting the environment and animals.

On this sweltering day in late March 2022, the security guard paced in front of 10 containers filled with thousands of mining machines. They hummed in the midday heat. Suddenly, a shiny object flickered on the horizon. As a Cessna plane circled nearby, he adjusted his beret and hurried to a nearby dirt runway.

The plane quickly landed on a steep, perilously short landing strip, and out stepped the pilot, Emmanuel de Merode, 52, the park's superintendent, on a routine inspection. De Merode grasped the strap of his bag with one hand and saluted the ranger with the other, who stood erect in the sun with his chest puffed out. Clean-shaven and with graying hair, he was the only one without a weapon. Behind him, the Cessna's wing was riddled with bullet holes, patched with duct tape.

De Meraud strode past a barking bush dog and into one of the 40-foot-long, chrome-green containers. Inside, a team of technicians in mesh vests monitored the mining machines amid wires, laptops and body odor.

The machines spend their days pounding away at complex math problems, and are rewarded with thousands of dollars’ worth of digital currency. They’re powered by a massive hydroelectric plant perched on the same mountain, making these containers cathedrals of 21st century green technology, surrounded by an even greener rainforest.

In many ways, the operation’s existence is impossible. Simply being in a volatile region known for corruption and growing deforestation, where foreign investment is as scarce as an electricity grid and a stable government, presents its own set of problems. “There are issues with internet connectivity, climatic conditions that affect production, and working in isolation,” said Jonas Mbavumoja, a 24-year-old employee at the mine and a graduate of the nearby University of Goma. There’s also the threat of dozens of rebel groups nearby. The violence is frequent, and people have been deeply traumatized by years of militia activity, missile attacks and machete attacks.

It’s a critical moment for Africa’s oldest protected park. After four years of disease outbreaks, lockdowns, and bloodshed, Virunga is desperate for funds and the region is desperate for opportunity. The Congolese government provides only about 1% of the park’s operating budget, leaving it largely to its own devices. That’s why Virunga is betting big on cryptocurrency.

Still, Bitcoin isn't usually associated with environmental protection or community development. People often assume the opposite is true. But here, it's part of a larger plan to transform Virunga's coveted natural resources, from land to hydropower, for the benefit of the park and locals. While mining methods like these may be unconventional, they are profitable and green.

Proceeds from bitcoin sales are already helping pay for park salaries, as well as infrastructure projects like roads and pumping stations. Elsewhere, electricity from the park’s hydroelectric plant supports modest commercial development.

That’s how you build a sustainable economy tied to the park’s resources, de Meraud said, even though the mine itself was a happy accident.

“We built the power plant and thought we would gradually build the network,” he explains. “Then we had to shut down tourism in 2018 because of kidnappings. Then in 2019, we had to shut down tourism because of Ebola. In 2020, the rest is coronavirus history. For four years, all our tourism revenue, which used to be 40% of the park’s revenue, collapsed.”

He added: "This is not what we expected, but we had to come up with a solution. Otherwise our national parks would have gone bankrupt a long time ago."

The park started mining in September 2020, when much of the world was in lockdown, he said: “Then the price of Bitcoin skyrocketed and we got lucky, but only this time.”

During this visit in late March, Congolese miners spoke to Director Le in French about their progress. With bitcoin currently trading at around $44,000, de Merode expects to make about $150,000 a month, close to what he earned during the peak of the tourism industry.

The looming question now is whether their luck has run out.

Virunga rose to fame about a decade ago with a acclaimed Netflix film that showed the park struggling against invading rebels and threats from oil giants. Those dangers are back, jeopardizing everything.

The Congolese government recently announced plans to auction off oil leases in and around the park. It’s still early days, but if drilling begins, it will mean the destruction of lives and important wildlife habitats. It’s no exaggeration to say that the health of the planet will be at stake: The Congo Basin is the world’s second-largest rainforest after the Amazon, and a major carbon sink.

Meanwhile, a militia group called the M23 has occupied the park's gorilla section and looted towns as it battles the Congolese army. In the past, the M23 has avoided direct confrontation with the Virunga, but in the past few months that seems to have changed.

On top of that, the recent collapse of FTX and the subsequent ripple effects that shook the entire crypto industry mean that de Meraud’s gamble sounds like a desperate gamble. But he points out that every day of mining is pure profit, so no matter how much the value of Bitcoin fluctuates, as long as it is positive, it is profitable.

Faced with these threats, de Meraud believes that Bitcoin mining can still be their trump card. He is neither an altruist nor a crypto scammer, he is a pragmatist who is willing to risk everything.

If the park can stick with it, it might just succeed.

A "special solution" in a "confusing place"

The first thing you notice about this stretch of land in the Democratic Republic of Congo is its green, a sea of ​​emerald green fed by abundant rainfall and fertile volcanic soil. Virunga borders the Congo Basin on one side and Uganda and Rwanda on the other. Its 3,000 square miles are home to half of Africa’s land animals, including about a third of the world’s last remaining mountain gorillas.

About 5 million people live just outside the park; most have no electricity to cook, light or heat their mud-walled homes. In addition, 80,000 people live inside the park. Many settled here before Virunga was created in 1925, when the country was still under Belgian colonial rule; others are refugees fleeing recent violence.

That’s why the park is an important source of charcoal (makala in Swahili) and food, even though farming, fishing, hunting and logging are all illegal. The park’s resources are often taken away: Virunga’s tree cover has been reduced by almost 10% between 2001 and 2020, and de Meraud estimates that Virunga’s losses from trees and ivory are $170 million per year. But the alternative for locals is not being able to pay local warlords, or starving to death. These are perfect conditions for corruption.

“Congo is a difficult place to make moral judgments.”

“The Congo is a confusing place where it’s difficult to make moral judgments,” said Adam Hochschild, author of “King Leopold’s Ghost,” which chronicles the Belgian monarch’s tragic 19th-century reign. Congo’s “huge size, hundreds of languages ​​spoken by the people, and colonization to extract wealth” compounded the situation, he said. “It’s hard to have a just and fair society under these circumstances.”

Congo has nearly as many displaced people as Ukraine, and despite decades of United Nations peacekeeping, the country is still mired in decades of conflict. Much of the park’s stolen profits goes to armed rebel groups, which some locals have joined for lack of better options. Some are relics of past wars, most notably the 1994 genocide in Rwanda. Others may be linked to the Islamic State. The largest of these is the M23, a Tutsi-led militia that is well-armed and that the United Nations says Rwanda supports. (Rwanda denies this, but its economy depends heavily on Congo’s resources.)

Virunga is therefore probably the only UNESCO site that regularly buries its staff: more than 200 rangers have been killed since 1996, an average of one per month. Cherubin Nolayambaje, who has been a ranger for eight years, calls it "the most dangerous job in the world".

Virunga has nearly 800 rangers, including about 35 women, who often encounter armed rebels in the park, as well as civilians who farm or live illegally there. Samson Rukira, an activist in the nearby town of Rutshuru, added that many locals don’t even know the park’s boundaries. While conservation requires community engagement to solve problems, “the unsafe areas we are in mean that rangers may not be able to have conversations,” he said.

De Meraud sympathizes with community complaints that individuals are being denied access to the park's great wealth. "Thousands, possibly millions of people suffer the short-term costs that we hope will turn this park into a positive asset. If we fail in that, then the harm will outweigh the good. But we firmly believe that this ecosystem, this park, can be turned around."

His plan hinges on three hydroelectric plants that have opened since 2013, in Matebe, Mutwanga and Luwero; a fourth is under construction. The theory is that if you can power your home, you don’t need to chop down trees for cooking. Electricity supports new jobs and businesses, like coffee houses and chia seed production. And, of course, bitcoin mines.

“That’s the misconception we want to correct the most: that Virunga is only about wildlife, it’s about the community with the wildlife. Our role is to try to facilitate that,” de Meraud continued. In one of the world’s most troubled countries, conservation cannot be implemented without local buy-in, he said.

Belgian Prince Partners with 'Bitcoin Indiana Jones'

The solution emerged in a majestic French chateau in the Loire Valley, nearly 4,000 miles and a world away from Virunga. In February 2020, crypto investor Sébastien Gouspillou arrived at Château de Serrant around noon, expecting a sales pitch from some showboater.

"It's very common to rent a chateau in France and it costs about the same as staying in a hotel," he explained.

Instead, he was greeted at the door by a princess whose family had owned the castle since the 18th century. Minutes later, she went to find Gouspillou's lunch date: her youngest brother, Emmanuel de Merode.

The director of Virunga Park was born in Tunisia into a Belgian aristocratic family. At the age of 11, he spent time in Kenya with legendary lion master George Adamson. Later, he trained as an anthropologist. In 1993, he came to Congo to help the rangers in Garamba National Park and research the bushmeat trade for his doctorate. In 1999, he went to Lopé National Park in Gabon, where he worked to acclimate gorillas and establish ecotourism. There he realized: "You have to work there for 20 or 30 years to really succeed. I want to go to eastern Congo."

De Melode arrived in Virunga in 2001, when the civil war was in full swing. He quickly realized the importance of the rangers’ work, as they often went unpaid. Together with Richard Leakey, a famous fossil hunter who later became his father-in-law, he began raising funds to support their salaries.

He became the park’s director after a group of gorillas were killed in 2008, with photos of their execution-style murders sparking international outrage. In the chaotic aftermath, Virunga’s then-director was arrested and state officials vowed sweeping changes; perhaps nothing more radical than a Belgian prince taking on a leadership position in a former Belgian colony.

De Meraud made an immediate name for himself. Two months after taking office, when rebels attacked the park headquarters in Rumangapo, he crossed enemy lines to negotiate and protect staff. After regaining control, he fired hundreds of rangers, arrested senior officers, then re-recruited rangers and trained them. Wages rose; rations and equipment improved. Morale was high, and animal numbers eventually rebounded.

But in April 2014, the story almost ended. De Meraud had traveled to Goma to give evidence against Soco Petroleum, a British oil company accused of bribing officials. He was driving alone back to the park when gunmen opened fire on his car. He fought back and ran into the forest to hide. But a bullet struck him in the chest, breaking five ribs and piercing a lung. Another lodged in his stomach and, he said, “went through the liver, the diaphragm, the lungs, and came out of the back.”

Finally, farmers on motorcycles drove up to help. When he finally reached Goma, he had to translate between Indian and Congolese doctors who lacked a common language. Without an X-ray machine, doctors cut him down the middle.

Two days later, while he was still recovering, Virunga premiered at the Tribeca Film Festival. The documentary, later acquired by Netflix, focuses on the park’s struggle to survive the sieges of M23 and Soco. The film, produced by Leonardo DiCaprio and nominated for an Academy Award, made de Meraud and his colleagues international heroes.

That’s how Gouspillou saw de Meraud at their first meeting. The two ended up talking for four hours at the Château de Serrant. De Meraud was in a bind: desperate to find a way to use Virunga’s excess electricity to fund the park, which was rapidly losing money. Gouspillou was eager to do something important.

On the train home, Gouspillou said: "I Googled it and found out he was a hero, and I wanted to help. We used to mine by buying electricity, which was not very efficient. The money would have gone to the oligarchs in Kazakhstan. In Virunga, we saw it was saving the park."

Gouspillou, who got into crypto after working in real estate investment, likes to call himself the Bitcoin Indiana Jones. Although he has no whip or fedora, prefers jeans, and is bald, he has a reputation for taking risks. His company, Big Block Green Services, is known for putting together controversial projects: it has advised on a "Bitcoin City" in El Salvador and is preparing for another crypto project in the Central African Republic.

With Gouspillou’s help, Virunga bought second-hand servers in early 2020 and began building a bitcoin mine. Like the hydroelectric plant, construction was painstaking. Getting containers and bitcoin miners from Goma meant driving two days along dirt roads through the rebel-controlled jungle.

“The Italian ambassador was killed right on the road we walked every day,” Gouspillou said. When he arrived in Luwero, he found bullet holes in his bungalow that de Meraud had not told him about. “I didn’t tell my wife either,” Gouspillou quipped.

Around this time, the death toll in the park rose sharply. In April 2020, 12 rangers, a driver, and four civilians were killed in the worst attack in Virunga's history. In October, another ranger was killed, and in January 2021, another in October and another in November. De Meraud described this as "our hardest year yet."

However, these difficulties were overcome and by September 2020, the Luviro mine began operations.

A local job posting hired nine Congolese cryptocurrency miners who scored highly on a competitive questionnaire. Most of them had heard of Bitcoin before, but their initial impressions weren't always positive due to scams in the region. Now many of them have crypto wallets.

“This is a whole new world,” said Ernest Kyeya, 27, an electrical engineering graduate from the University of Goma who now works at the mine.

He added: “It took me a little time to get used to the terminology, understand the operation of the mining machine, and try to repair and maintain it. But I was treated as a member of the team, not just a simple worker. This responsibility gave me confidence.”

The miners work 21 days straight and then have five days off. Our accommodation is not "luxury," Kyeya said, but we like what we do. He added: "It's different from the city. Everything has to be planned. But it's worth it. It's an honor to work here, 13 hours a day, sometimes more, because there's nothing else to do in the jungle."

There are now 10 containers powered directly by the plant’s 4-meter turbines. Each container can hold between 250 and 500 miners. Virunga owns three of the containers, and all proceeds go to fund various park services. The other seven belong to Gouspillou. He pays Virunga for the electricity, and any bitcoins he mines belong to him and his investors.

De Meraud estimates the mine brought in about $500,000 for the park last year, when the pandemic had cut off most other sources of income.

Capitalizing on the popularity of the digital ape, the park partnered with NFT project CyberKongz to auction off the gorilla NFT through Christie’s, which provided the park with an additional $1.2 million. Some of that money was used to purchase two of the three shipping containers owned by the park.

“That’s how we got through COVID,” de Meraud said.

Bitcoin as the Savior

“When Emmanuel saw the money, he was very surprised. I am sure about our success,” Gouspillou said, speaking quickly when the conversation turned to the sustainability of cryptocurrency.

Not everyone is so sure. Nor are all Congolese supporters of radical development. Even if some do benefit, most won’t get jobs. Years of war and foreign exploitation have also taken a heavy toll on locals, who often praise the park and curse it in the same sentence.

Meanwhile, for the international community, the idea of ​​Bitcoin as a savior has perhaps never been harder to sell.

Much of this criticism has to do with the vast amounts of electricity required to mine Bitcoin, electricity that is often generated from fossil fuels. The director-general of the European Central Bank recently called Bitcoin mining an “unprecedented source of pollution.” And it’s often expensive to connect; the seven largest cryptocurrency mining farms in the U.S., for example, use the same amount of electricity as all the homes in Houston. (U.S. cryptocurrency companies are not legally required to report their carbon dioxide emissions.)

Many communities, especially in developing countries, have also been exploited by international cryptocurrency miners, some of whom take advantage of weak local regulations or tax incentives to siphon off electricity, destroy their surroundings, and then disappear to the next hotspot.

“The main problem is that the benefits are always very limited compared to the costs,” said Alex de Vries, a doctoral candidate at Vrije Universiteit Amsterdam who studies the sustainability of cryptocurrencies. “Miners overpromise and underdeliver.”

The key, he said, is to recoup the investment, which means running the miners 24/7. “Local communities are often better off without them,” he concluded.

Peter Howson, assistant professor of international development at Northumbria University who conducted the research with de Vries, agrees that Congo's clean energy could be used more efficiently. He said: "In the DRC, bitcoin miners are outcompeting more productive forms of green industrial development. These industries may employ fighters, poachers and illegal loggers. Even the largest bitcoin companies employ only a handful of people. These are very precarious jobs with insecure contracts. Is this a good model? No. They should be using their hydropower for something useful."

Esther Marijnen, a Dutch political ecologist who has been working in Congo since 2013, made a similar point, arguing that Luviro’s mine is at odds with protecting the environment and questioning what gorilla sanctuaries have to do with cryptocurrencies. For all the development going on in Virunga, especially around hydropower, she noted that the park has failed to bring widespread stability or employment.

She asked: "What is the goal? Is it rural electrification, so that people around the park can use electricity to improve their relationship with the park? Or is it to attract business?"

Jason Stearns, founder of the New York University Congo Research Group and a former UN investigator who considers de Merode a friend, warned that militias could also benefit from hydropower, so it would not necessarily lead to the militants laying down their guns. “I admire Emmanuel’s tenacity and willingness to think outside the box, but this ideology that free markets will bring peace is antithetical to what has happened in Congo over the past 20 years,” he said.

Still, Gouspillou insists that bitcoin mining “can be a force for development.” In fact, he sees the Virunga project as a potential model: “People say it’s bad for the environment, but here it’s clean energy. It’s a formula that can be replicated.”

He added that because the mine relies on the river, there are no fossil fuels, and Luviro's lack of customers means there is no local demand for electricity.

Michael Saylor, co-founder of investment firm MicroStrategy, agrees, calling Virunga’s model “an ideal high-tech industry for a country that has a lot of clean energy but can’t export products or provide services with that energy.” To that end, de Merode is in discussions with national parks in other states about turning their waterways into hydropower supplies.

Peter Wall, CEO of Argo Blockchain, which operates a hydro mine in Quebec, noted that "85% of the operating costs of a mine come from electricity," meaning even low-power mines can be profitable. "I think (the Virunga mine) is the first, and I haven't heard of any mining in a national park. At the end of the day, you need three things: power, machines and capital." Virunga has all three.

Still, all crypto mining farms, including Luviro, need to deal with plummeting prices. Bitcoin alone is down more than 70% from last year’s high. Then came the FTX meltdown, which lost $32 billion overnight. All that, plus crypto mining’s record of pollution, could turn off key donors that places like Virunga rely on.

But de Meraud said: "It's still a very good investment for the park. We are not speculating on its value, we are generating value. If you buy Bitcoin and it goes down, you lose money. We are creating Bitcoin with excess energy and monetizing something that otherwise had no value. That's a big difference."

Even if Bitcoin dropped to 1% of its value, the 10 containers would still be profitable, he said.

De Meraud wants the system to be essentially self-sustaining, which is one reason the park has built so much infrastructure. He keeps smiling when I ask him what would happen to the mine if something happened to him.

“If I crash? No problem, the digital wallet is managed by our finance team. We’re unlikely to hold Bitcoin for more than a few weeks anyway because we need the money to run the campus. So if something happens to me or our CFO loses his password, we’ll give him a good beating, but it won’t cost us much.”

A gamble on the future

De Melaud stressed that cryptocurrency is not the only solution to saving Virunga, but part of a larger ecological business model. According to a 2019 report by Cambridge Econometrics, a British economic consulting firm, other green investments in Virunga, including coffee and chocolate farming, could have an annual impact on GDP of up to $202 million by 2025.

"What we're trying to show is that a green economy means diversity, that hundreds of different industries can rely on sustainable energy in the long term, and that's a healthy society. It's not like relying on oil alone," de Meraud said.

About 100 miles south of Luwero, from the towers of the Matebe hydroelectric plant, you can see the plan in action, with wires snaking into the town of Rutshuru. It’s not a metropolis, but in many ways it’s a success. It’s a place where the vision has been working, even if that success is incredibly tenuous. The area has become the heart of territory claimed by the M23 movement. Still, when I visited this spring, the RUSA soap factory was churning out 5,000 bars of soap a day, with equipment purchased with a Virunga-backed microloan. The owner, Christophe Bashaka, was grinning from ear to ear, saying the work would be “impossible” without the hydropower.

At a corn factory a few minutes' drive away, Elias Habimana stripped off his leather jacket, picked up a giant calculator and showed me the thousands of dollars he had saved: hydroelectric power allowed him to abandon expensive generators and employ 30 people.

“De Meraud made it possible and now it’s much easier,” he said.

A park-run chocolate factory near Beni provides fair prices and a legal market for cocoa farmers. Virunga Park produces 10,000 bars of chocolate a month, a number that will continue to grow as Virunga has partnered with Ben Affleck's Eastern Congo Initiative, an organization dedicated to getting park-produced chocolate into stores in the United States.

According to de Meraud, the power from Virunga has created more than 12,000 jobs; since the average Congolese family has at least five members, a job is a huge stabilizer in a place where desperation drives radicalization. Gouspillou noted that none of the core members of the Congolese encryption team were militiamen, but some of the temporary workers involved in the construction were.

At the park’s headquarters in Rumangapo, the stakes of the experiment are on stark display. Near piles of confiscated charcoal and gorilla graves is the grave of the first female ranger. Widows make stuffed toys and rifle straps in a workshop with dozens of stars inscribed with the names of the fallen. “My husband loved this place,” a woman named Mama Noela told me. After her father died, she worked as a day laborer to support a family of five until she learned a craft here: “It gave me value, it gave me hope.”

On my last morning in the park, the shelling began early. The next day, missiles streaked across the sky as the M23s moved toward the army, engulfing Virunga staff and thousands of Congolese.

A few days after I left, de Meraud ordered the evacuation of Rumangapo. Matebe was next. Later that week, a UN helicopter crashed in a militia-held area, and fighting engulfed Rutshuru and Matebe. Through it all, the park staff stayed. By luck or divine magic, the M23 retreated to the hills.

However, this respite was short-lived.

By midsummer, fighting resumed, with towns falling as rebels swept toward Goma. The government has announced its oil ambitions, and in August, U.S. Secretary of State Antony Blinken announced plans for a joint survey of areas for exploration.

Since then, a hydroelectric station has been shelled and high-voltage power lines leading to Goma have been hit. The M23 continued its bloody campaign in Rutshuru and in October captured Rumangapo, allowing de Melode and his crew to relive an occupation that recalled the horrific scenes that had captivated Virunga audiences a decade earlier.

In early January, the M23 announced its withdrawal from Rumangabo, but park staff warn that they have withdrawn from other occupied territories in recent months only to quickly return, and that insurgents are still present in the area. And even if the M23 does withdraw, various other rebel groups remain; just a few weeks ago, around Christmas, a group called Mai-Mai killed two rangers.

Meanwhile, Gouspillou continues to convince people of the future of cryptocurrencies, traveling to Ghana for the first African Bitcoin Conference and waiting for things to cool down before returning to Luviro.

De Meraud is still waiting, Kyeya and Mbavumoja are still working, and Luviro’s mining rig is still humming along. After all this good and bad luck, le directeur is stuck with a small team that, as he put it in a WhatsApp call in late August, is “getting us out of this mess.”

Original link:

https://www.technologyreview.com/2023/01/13/1066820/cryptocurrency-bitcoin-mining-congo-virunga-national-park/