Cryptocurrencies have taken the world by storm. Just about one and a half-decade ago nobody could even suspect that a decentralized currency that lives off of computational power could cost so much in such near future. The idea behind the digital currencies has always been decentralized, tax-free ecosystem giving pure profit to those who were interested in such operations. The process of getting cryptocurrencies in exchange for computing power is called mining. A lot of people and companies during the “gold-rush” of the 21st century have made a fortune not only by mining but also trading said currencies on the world exchanges.
A small country in the Caucasus region, the republic of Georgia, or Saqartvelo as it is called in the local language, was once the richest part of the Soviet Union. However, the corrupt government and internal destabilization which could be attributed to the Russian intervention via assassination of its first democratically elected president, Zviad Gamsakhurdia, has led to the civil war and ended with extreme poverty all across the nation. When the street protests finally ousted the last Soviet-era leader in 2003 the newly democratically elected government started fighting against numerous issues plaguing the country.
The new party called the National Movement started selling the country as an extremely business-friendly tax-haven to draw in every possible investor they could. All of this tied into their new European and Western politics has led to a vast interest in the country. The developments brought the attention of big financial institutions and casinos drawing investments left and right. Once a cryptocurrency boom started all across the world, the government of Georgia saw an opportunity and in the end made the country one of the biggest bitcoin miners in the whole world.
This brings us to one of the most notable companies in the whole post-soviet space is called Bitfury. Founded in 2011, the Latvia based tech company has made mining bitcoin its trade. This is to a huge extent due to the government subsidies provided by the Georgian government allowing the company to open a free industrial zone. This is in addition to the fact that 45 acres of land space was sold to BitFury for only $1. Lots of countries in the post-soviet state, not fortunate enough to be close to Europe, have been struggling with the downfall of their economy. This was due to a number of aspects starting from an extremely high rate of corruption in the Soviet Union, which has led to the concentration of finances into the hands of a small percentage of people. Once the USSR collapsed, they either up and left their respectful countries seeking some refuge with their illicit gains all across different parts of the world or just wasted the savings away trying to build new corrupt schemes and, in Georgia’s case, have succumbed to the pro-western new law and order oriented government’s law enforcement agencies.
As soon as BitFury was allowed to open its doors in Georgia the citizens followed the footsteps. With the promises of Georgians making money from home lots of people started selling their cars, extra real-estate, or even cows to build new mining rigs. This was due to the fact that the government of Georgia subsidized the digital experiment. There were almost no regulations for companies concerned with mining activities. The electricity was not being taxed and the companies were allowed to keep almost all of their income to themselves. At some point, a Georgian ex-prime minister and the richest oligarch in the country have given BitFury $10,000,000 loan to set up their operations in the country. The government has even expanded an entire power station next to the BitFury’s Walmart sized factory full of crypto miners at no extra cost for the company.
With the price per kilowatt-hour fluctuating somewhere around 5 to 6 cents Bitfury saw a huge opportunity to make an immense amount of money in the republic of Georgia. When the company first started building its infrastructure in the country the Bitcoin price was around $350 spiking when the full-blown operation was already at hand to as much as $20,000 per BTC.
However, things were not all rainbows and sunshine for long. While at some point mining bitcoin was extremely profitable and “easy” as of now it yields almost no results except for companies that are operating a cutting-edge technology with a crazy amount of processing powers. Even in that case, the firms are struggling to justify the energy consumption even in regions where electricity costs are already bare minimum. As the energy price does not justify the revenue lots of the machines are just shutting down. One of the Georgian businessmen who managed to create a mining stash house in the garage of his friend has stated that he had to shut down 15 out of 60 miners already with more to come as the mining is becoming harder and harder. This is in the face of the reality where almost 200,000 people set up mining computers in whole Georgia when the business seemed much more profitable. The reason the energy demand is so big is due to the constant calculations the computers need to go through. This generates an extreme amount of heat, which needs cooling. The process of cooling consumes high amounts of electricity.