With a population of fewer than 4 million people, Georgia’s position as second in the world for cryptocurrency mining is an intriguing one.
US technology company Bitfury accounts for significant portion of the mining activity in Georgia. The company runs a vast data center filled with mining software on the outskirts of the capital Tbilisi, which recently ran into controversy regarding overly generous electricity rates.
A number of smaller mining companies have also emerged across the country and a vast amount of individuals are mining the currencies at home. One political party in Georgia has even begun raising funds for their campaign through mining cryptocurrency via supporters computers.
Both cheap hydroelectricity and friendly regulations have contributed to the widescale adoption of the practice, now ranking Georgia second in the world only to China.
Economic conditions of Georgia
While some see the situation in Georgia as an exciting opportunity to enter the cryptocurrency market and embrace a libertarian philosophy, skeptics are concerned that it is unsustainable.
The National Bank of Georgia issued a warning, advising people to exercise caution when investing in digital currencies. A former regulatory official with the bank, said “This is high-tech gambling. The profits just go offshore.”
While it is true that few jobs have been created by mining companies entering Georgia, and the majority of profits are reaped by the companies such as Bitfury, it does still benefit the economy if not just because of the costs of maintaining the mining farm.
As well as this, it adds money to the economy through the individuals mining from home, made popular thanks to the larger companies popularizing the process. The biggest concern for sustainability is the volatility of Bitcoin that tends to dictate the value of all digital currencies to a certain extent, although recently the market has been far more favorable.
The poor economic conditions of the country, with many living below the national average of USD 400 a month, make it unsurprising that cryptocurrency mining would become popularized with the quick wealth associated with digital currencies.
NPR has reported that many people are spending their savings or taking out loans to buy their own mining setups- not a bad thing as long as the price of bitcoin remains stable.
The final pull towards cryptocurrency unique to Georgia comes from the freedom that citizens have been exercising since leaving the Soviet Union economy in 1991. While economic conditions may not be flourishing, residents are enjoying earing and spending their money as they wish.
Mining cryptocurrencies require a certain type of software and hardware to be profitable, but with both of these attained it can be done anywhere.
The process essentially involves computers liked across the internet competing to solve mathematic puzzles, with the solutions rewarded with bitcoin or other cryptocurrencies. This is then registered and verified on the decentralized blockchain.
Large-scale mining operations such as that of Bitfury consume huge amounts of electricity, running 24 hours a day to solve mathematical problems at the heart of securing the Bitcoin network.