With a bitcoin mining firm that has been bringing in $20,000 per month, this 22-year-old can subsist in Lebanon.

With a bitcoin mining firm that has been bringing in $20,000 per month, this 22-year-old can subsist in Lebanon.

In Lebanon, it costs a lot to maintain a small-scale cryptocurrency mining operation. According to Ahmad Abu Daher, he and his staff of over 40 Lebanese and Syrian workers are working nonstop to staff thousands of machines throughout the nation. 

"We are unable to sleep. At 2:36 AM Lebanon time, the 22-year-old Abu Daher informed CNBC that there could be no breaks. My entire team is still awake. They do not snooze. Our shift typically works 16 hours a day, but we occasionally go up to 18 or 19 hours.

In a nation where money no longer makes sense, Abu Daher's voice competes with the sound of machines whirling in the background as they individually crunch thousands of difficult math equations to produce a mix of crypto tokens. 

An elite international financial community formerly flocked to Lebanon's once-vibrant and resilient banking industry. But the nation's economy is in ruins as a result of decades of war, poor fiscal management by the government, and banking practices that the World Bank has compared to a Ponzi scheme.

Since 2019, the value of the local currency has decreased by more than 95%, the minimum salary has been reduced to $17 per month, pensions are almost useless, and bank account balances are just numbers on paper. Banks abruptly close, and ATMs frequently run out of money or are completely unavailable due to widespread blackouts. Many people told CNBC that they have become accustomed to withdrawing money at 15% of its original value when they are able to access their accounts. 

In light of this, Abu Daher entered the cryptocurrency mining industry a little over two years ago. He and a friend started with three hydroelectric generators in Zaarouriyeh, a town in the Chouf Mountains 30 miles south of Beirut.

When we first got going, it was our brilliant notion to earn money while dozing off or eating, according to Abu Daher. Abu Daher claims he spends 20 hours every day online these days. 

Abu Daher, an architect by trade, understood he had to take initiative when he observed numerous other university students struggling to obtain employment after graduation. He therefore began teaching himself various technical skills by viewing YouTube videos.

Abu Daher claims that business is booming 26 months after he originally opened for business. 

He currently operates 400 crypto farms throughout 42 towns using a combination of hydropower, solar electricity, and fuel. Each farm contains between 5 and 100 machines. Abu Daher claims to make roughly $20,000 per month, with mining typically accounting for half of his earnings and machine sales and cryptocurrency trading for the other half.

Abu Daher responded that the estimate was put together through trading, mining, and selling equipment, in a combination of transactions including cash, cheques, and tether, as well as several cryptocurrency wallets, when CNBC requested crypto exchange statements and copies of bank balances to support it. 

Abu Daher undoubtedly possesses the accoutrements of a mining tycoon.

Mohamad El Chamaa, a journalist for L'Orient Today who has previously written about Abu Daher's cryptocurrency mines, remarked that he was rather impressed when Ahmad arrived in a white Range Rover to meet us and give us a tour of the town. When he was a college student in the architecture department and I was his teaching assistant, I got to know him before Covid. It seems that the cryptocurrency industry was treating him well.

Establishing a bitcoin mining business

Soon after he started mining cryptocurrencies, Abu Daher had a couple black swan events working in his favor. 

China kicked out cryptocurrency miners in May 2021, which resulted in an influx of cheap, old mining equipment and decreased competition. This occurred when the price of cryptocurrencies increased and approached all-time 

As geopolitics fundamentally changed the crypto mining scene, Abu Daher and his colleagues started to establish their own farms across Lebanon using rigs they had purchased from Chinese miners at fire sale rates. It was not always easy to pay for the equipment. 

"USD tether is essentially a key intermediary currency between people in the Chinese hardware market to Lebanese purchasers due to sanctions controls, difficulty with using cash, and specifically in Lebanon, the banking system and the inability to use dollars or wire money," said Nicholas Shafer, a University of Oxford academic studying Lebanon's crypto mining industry.

The farms owned by Abu Daher are spread out across the nation, with about half of his machinery located in the hydro-rich Chouf range and the other half in various locations throughout Lebanon, including the Beqaa Valley, which is close to the Syrian border and provides solar power as a backup electricity source. (However, as Shafer points out, the capacity issue with solar means that it frequently does not provide enough megawatts to mine at scale.) 

Abu Daher also began to host rigs for residents of Lebanon who required constant income but lacked technical know-how and access to affordable, reliable electricity due to the country's frequent blackouts.

It appears that the mining boss is paying his crew a portion of the proceeds. Shafer states that all 40 of Abu Daher's employees receive a formal wage that ranges from $800 to $4,000 per month in either U.S. dollars or tether. Shafer performed field study at some of Abu Daher's mining sites. According to Shafer, the blacksmith, who is paid the least of all of Abu Daher's employees, makes more than 26 times the minimum salary in Lebanon. 

Abu Daher mines a variety of cryptocurrencies, such as litecoin, dogecoin, bitcoin, and ethereum classic. In certain situations, he has set up the machines to mine the coin that is more lucrative that day. He oversees and records everything remotely using the program TeamViewer.

According to Abu Daher, "Each machine may mine multiple coins, and each coin has its own unique algorithms." "Perhaps bitcoin is the greatest coin to mine right now, followed by litecoin and ethereum the next day. To make the most money we can, we are constantly going forward. 

Two-thirds of his clients are Lebanese, and some of them mine for bitcoin, dogecoin, or litecoin to supplement their daily expenditures on things like food and gas. 25% of the population is Syrian, and the remaining 8% is made up of a variety of individuals from Egypt, Turkey, France, and the United Kingdom.

Abu Daher just acts as the computers' custodian with some of his clients, housing and cooling them while also supplying consistent electricity and reliable internet connectivity. In return for a fee, he provides them a share of the cryptocurrency mining profits. Others only ask him to facilitate the sale and installation 

Abu Daher prefers to spread out his electrical footprint, dividing up his thousands of miners in places like stores, basements, and apartments, each with 10 to 20 machines, unless it's a house where he can split up groupings of miners into different rooms. This is in contrast to the massive mining farms of Texas that stack hundreds of thousands of machines into buildings the size of multiple football stadiums. Abu Daher provides the space in exchange for a monetary rent payment. Abu Daher, for example, runs 15 ASICs in what was formerly a barbershop.

"At first glance, the town does not resemble much of what you would expect a "mining" town to look like. However, once you enter the storefronts that have taken the place of conventional businesses, you start to feel differently. Make no mistake that it is a fully fledged mining farm, as evidenced by the fact that one of Ahmad's farms was once a barbershop and still has a mirror and advertisements for cosmetics inside, said El Chamaa of some of the mines in the Chouf range. 

The mining farms themselves were not as impressive as the ones I've seen on TikTok, he said, but I noticed that they still did the job.

Currently, Abu Daher is attempting to inform the people about mining, primarily because he needs the additional labor to maintain the business. 

"We are attempting to teach someone about mining in each hamlet in order to aid us. We have a tremendous number of machines, and we are selling a huge number of machines, so my staff and I can't cover all of them," he stated.

"Fresh Dollars"

Money ceased making sense in Lebanon on October 2019. An unfortunate taxing scheme and years of economic mismanagement caused a season of turmoil, and as most of the world entered Covid lockdowns, banks first restricted withdrawals before closing completely. 

Inflation spiked sharply. The local currency, which had a 25-year peg of 1,500 Lebanese pounds to $1, started to decline quickly. Currently, the going rate is about 40,000 pounds to $1. When the banks reopened, they refused to keep up with this sharp depreciation and gave significantly worse exchange rates for US dollars than they were valued on the open market.

According to estimations from numerous residents and specialists located around Lebanon, withdrawals of U.S. dollars deposited into the Lebanese banking system prior to 2019 are currently limited, and each so-called "lollar" is paid out at a rate of about 15% of its actual value. 

In the meanwhile, banks continue to provide deposits of US dollars made after 2019 at the full market rate exchange rate. These are now referred to as "fresh dollars" in informal speech. 

Despite the volatility of cryptocurrencies—the price of bitcoin has decreased by nearly 70% from its high one year ago—the ability to make money is a powerful motivator for Lebanese to start mining.

Three years ago, Rawad El Hajj, a 27-year-old marketing graduate, learned about Abu Daher's mining enterprise through his brother. 

El Hajj stated, "We started because there isn't enough job in Lebanon. 

El Hajj, who is from the city of Barja, located south of the capital, began modestly by investing in two miners. 

Then, he continued, "every month, we started to get bigger and bigger."

El Hajj pays a third party to host and maintain the rigs due to the distance to Abu Daher's lands. According to him, his 11 mining devices for litecoin and dogecoin generate about.02 bitcoin, or $360, a month in total revenue. 

Salah Al Zaatare, an architect who resides in the coastal city of Sidon 20 minutes south of El Hajj, has a similar tale to tell. Al Zaatare tells CNBC that in order to increase his income, he started mining litecoin and dogecoin in March of this year. He now maintains 10 machines with Abu Daher. Since Al Zaatare's machines are more recent ones, he earns around $7,200 more each month than El Hajj.

Al Zaatare told CNBC, "I got into it because I think it would become an excellent investment for the future. 

Al Zaatare withdrew his entire savings from the bank prior to the 2019 financial crisis, and he kept onto that money until he made the decision to invest his entire life savings in mining equipment last year. 

Myriam Harfoush, a 32-year-old French teacher residing in Baakleen, roughly 45 minutes south of Beirut, said, "I don't have any trouble today living in Lebanon since I am collecting fresh money from mining."

Harfoush, a cryptocurrency trader on the side, told CNBC over WhatsApp that she withdrew all of her funds from the bank at the beginning of the crisis and that she now owns mining equipment in Zaarouriyeh. (Harfoush only communicated with CNBC via written WhatsApp messages, citing reservations about speaking on the phone.) 

Shafer stated, "If you can obtain the equipment and the power, you can get the money. "With the appropriate kind of expertise, you can manufacture cryptocurrency in your local setting."

The energy issue

A procedure known as proof-of-work is used to create cryptocurrencies like bitcoin, dogecoin, and litecoin. Miners use powerful computers to confirm transactions and produce new tokens at the same time. Since electricity is the sole variable cost in a low-margin business, miners frequently look for the least expensive energy sources because the process uses a lot of it.

Renewable energy sources typically give the most affordable electricity prices. 

Nic Carter, a partner at Castle Island Ventures, which specializes in blockchain projects, described it as a method to transform a regionally trapped resource (electricity) into a universal good. "One of the traditional resources that tends to have a supply-demand imbalance is hydro, especially run on the river." 

According to Carter, run-of-the-river hydro can't keep up with demand swings and grid needs, whereas dammed hydro can, says CNBC.

As we infamously witnessed in Sichuan and Yunnan in China, "you often see these stranded or underutilized hydro resources being monetized part of the time with bitcoin mining," concluded Carter. 

In order to generate electricity, Abu Daher uses a hydropower project that uses the 90-mile Litani River that runs through southern Lebanon. He claims to receive electricity at pre-inflationary prices for 20 hours every day. 

Abu Daher remarked, "In essence, we pay very little for power and earn new money from mining.

However, the government is beginning to tighten up because of the electricity scarcity. 

In the hydroelectric town of Jezzine, police conducted a raid in January, capturing and disassembling mining equipment. Following that, it was reportedly stated that "energy demanding cryptomining" was "straining its resources and draining electricity" by the Litani River Authority, which is in charge of the nation's hydroelectric facilities. 

Abu Daher, though, tells CNBC that he is not concerned about being searched or about the government's plan to raise the price of electricity.

Because we are using legal electricity and not hurting the infrastructure, he continued, "We have several talks with the police and we don't have any difficulties with them." 

While Abu Daher claims to have installed a meter that measures the amount of energy his machines have used, other miners are allegedly illegally connecting their rigs to the grid and without paying for electricity.

In essence, he continued, a lot of other people are experiencing problems because they are using electricity without paying for it and harming the infrastructure. 

The next objective for Abu Daher, who has a talent for developing innovative solutions to address practical issues, is to develop a closed energy loop for his mining farms. He imagines a system in which the heat generated by the equipment is captured and used to power the miners as well as to heat houses and hospitals in the communities where these mines are located.

"We would buy mining equipment rather than fuel to heat our homes. Abu Daher described his lofty vision for the future of cryptocurrency mining in Lebanon: "We produce heat to heat up our building, and at the same time, we produce money.

Article Credit: CNBC

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