While the world has stopped talking about Bitcoin for a while, Georgia is continuing a massive cryptocurrency investment program that includes a partnership with BitFury, one of the world's largest companies in the industry that has been based in the country since 2015. The New York Times reported that in that year Georgian Dream, the ruling party founded by entrepreneur Bidzina Ivanishvili, offered BitFury a $ 10 million loan and sold it 18 hectares of land for one dollar; the country's involvement in the cryptocurrency sector has steadily increased since then.
BitFury accepted Georgia's proposal, and built a department store to “mine” bitcoin: that is, it filled a warehouse with computers that, day and night, work to keep the system behind Bitcoin active, obtaining cryptocurrencies in exchange. There are hundreds of companies around the world that do this, often building warehouses in isolated areas of countries like China, Iceland, Canada or Russia. By providing a sufficient amount of computers, the Bitcoin system rewards the “miners”, as they are called in jargon, with a certain amount of Bitcoin. The greater the computing power, the greater the gains.
Given that these companies are paid in bitcoins, the value of the cryptocurrency greatly influences earnings: in December 2017, bitcoins touched $ 20,000 per unit, while today they travel around $ 3,500. Many companies around the world have not resisted this decline in value, and have had to close. However, BitFury enjoys some advantages: the government, for example, sells electricity to the company at half the price of Europe or the United States, and has arranged various types of tax exemptions. The BitFury extraction center in Georgia consumes the energy of around 50,000 homes, and is powered by hydroelectricity drawn from the rivers flowing down from the Caucasus Mountains.
In exchange for government aid, BitFury helped move national land registers to the blockchain – the technology behind cryptocurrencies. It is a very complex thing, but simplifying a lot it is a system for recording information that, according to advocates of the technology, is safer and more practical to share than those normally used for computer logs.
But BitFury isn't the only company mining bitcoin in Georgia. Many inhabitants have taken advantage of the concessions to invest in the sector, and today almost 10 percent of all electricity produced in the country is destined for extraction centers. According to a World Bank report last year, about 5 percent of families in Georgia are involved in a mining project. One consequence is that Georgia has a very high per capita energy consumption, about three times higher than countries with similar GDP per capita.
According to the New York Times, around 200,000 Georgians invested in cryptocurrencies by setting up small and improvised mining centers, often in cellars or garages of homes. Between 2015 and 2017, bitcoins increased in value to the point that there were ranchers and farmers who decided to invest in cryptocurrencies, selling their livestock to buy computers. But the decrease in the value of bitcoins during 2018 put these businesses in crisis: George Kirvalidze, a 35-year-old who had put together a mining center with friends and who managed to mine 20 bitcoins, told the New York Times. that last November they shut down 15 of the 60 computers in their center, because it was too expensive to keep them all running.
These difficulties are felt to a much lesser extent by BitFury, which continues to enjoy energy at rock bottom prices. In all its centers around the world, it is estimated that it mines more than 5 percent of all new bitcoins created: it is not known exactly how many come from Georgia, but they are many. To get an idea, the owner of a small Georgian start-up told the New York Times that he mines about 10 bitcoins a month with one megawatt of installed power. BitFury says it uses 45 megawatts of power, which could actually be even more. For this reason, many have accused the government of having favored the company excessively, making its competitors foot the bill.
One of the people who contributed most to Georgian investments in cryptocurrencies was Remi Urumashvili, a lawyer with many contacts in the ruling class who – after being introduced to bitcoin by the CEO of BitFury – lobbied for the Georgian government to grant extensive concessions to the cryptocurrency sector, both as regards the extraction and as regards the exchange with traditional currencies. According to a rumor reported by the New York Times, the one who gained from this operation was Ivanishvili himself, then prime minister and now the richest oligarch in the country, who granted an expensive loan to BitFury to transfer his activities to Georgia.
In addition to the land registers, the Georgian government's plan is to move part of the tax registers to the blockchain as well. “The digital transformation of the economy is our priority, and we support it in every way possible,” Economy Minister George Kobulia told the New York Times. This strategy was adopted to try to modernize the country and launch its economy after the complicated transition from the Soviet period to the contemporary.
