Since the breakup of the Union of Soviet Socialist Republics commonly known as the Soviet Union on 26th December 1991, the map of Central Europe has been turned on its head.
With an area of 22,402,200 square kilometres (8,649,500 sq mi), the Soviet Union was the world’s largest country, a status that is still retained by the Russian Federation, covering a sixth of Earth’s land surface.
In 1991, countries that had been under Moscow’s one-party state rule between 1922 and 1991 were freed from centralized control and finally left to re-establish their own national identities. For Moscow this was often at odds with their own, causing volatile relationships with Georgia and Ukraine with disputed Crimea a continual flashpoint.
Ukraine, Uzbekistan, Kazakhstan, Belarus, Azerbaijan, Georgia, Tajikistan, Moldova, Kyrgyzstan, Lithuania, Turkmenistan, Armenia, Latvia, and Estonia all broke loose as the USSR crumbled in 1991 with Soviet communism in tatters.
The lengthy restructuring of many of these countries’ economies resulted in some re-joining another league of nations, this time the 28-member European Union. Estonia, Latvia, and Lithuania took this route whilst others from the old USSR still chose, some reluctantly, to maintain their ties to Russia as part of their own unique plans of economic reconstruction.
Since the creation of Bitcoin in 2009, many economies have begun to look to cryptocurrencies as part of a restructuring of outmoded financial systems, with both governments and central banks exploring the adoption of cryptocurrency and blockchain technologies for retail and large-value payments.
The Russian government has even considered the prospect of a crypto rouble as a foil to US sanctions. President Putin stated earlier this year that Russia cannot be “late in the race” for blockchain adoption, which he says includes crypto mining arguing, “Russia cannot allow this.” The country’s cold climate has been a pull, as companies draw on this as an important feature for cutting down energy costs associated with the cooling needs of mining infrastructure.
Crypto mining in Russia has become a huge industry on an individual level, but more importantly for the government at an industrial scale also. This is now driving operators towards locally run Russian mining pools. The Russian Association of Crypto Industry and Blockchain (RACIB) claims that there are now over 400,000 people employed in the sector. 70,000 enterprises operate hundreds of thousands of mining rigs, with an increase in one-man operators working from their homes.
The fall in the value of cryptocurrencies has consequently had a recent effect on hardware pricing though, with rigs that might have sold for USD 3,500 in January 2018 now achieving prices some 37.5% less a year later as demand falls. Although small-scale mining by amateur miners is clearly being hit hard, companies are developing more financially viable ways of operating.
Still in Russia, and renown for the Gulag where Stalin imprisoned political dissenters in appalling conditions between 1930 and 1945, the region’s freezing conditions in winter has become the crypto miner’s best friend. Siberia is fast becoming Russia’s mining hub with most activity centered around Irkutsk, 2600 miles east of Moscow with an average temperature of just one degree above freezing. In Irkutsk the cost of labour is low and real estate is cheap, giving miners an extra incentive for making the move to Russia’s wild frontier. The most significant boon to miners is the cost of electricity. On average in Russia, one pays nine cents per kWh versus 12.7 in the U.S.A and 25 in the U.K.
Bitcoin Babushkas: Cryptocurrency mining in Siberia
Latvia has the crypto bug, but not necessarily the support it would want from its government, with the Latvian central bank maintaining a keep-away stance as its advice to customers. The Cryptocurrencies’ exponential growth in the Baltic country has generated increased interest from the government as potential tax revenue.
In the Ukraine capital, Kiev, such is the hype surrounding Bitcoin that a statue of the pseudonymous creator of Bitcoin was ordered for construction in the same location where a statue of Russian communist revolutionary Lenin, used to stand. In March, the Minister of Economic Development said the government was planning to include cryptocurrency mining into the official state register of economic activities.
Last year police department employees were caught mining cryptocurrencies using the department’s resources for over four months before they were discovered and their mining farm seized. This kind of enthusiasm illustrates the way many Ukrainians view crypto mining; as a quick fix to hardship.
Crypto mining has become a significant factor of cryptocurrency activity in Ukraine with a recorded USD 80 million invested in this area. However, Ukraine still hasn’t endorsed legislation to legalize cryptocurrencies despite increased activity in the country’s crypto space; legislation talks which are reported to be looking at blockchain and the storage and trading of cryptocurrencies are long awaited by exchanges and miners.
Estonia even toyed briefly with launching its own cryptocurrency, the Estcoin, through the country’s e-residency program, but later shelved the idea. One reason for Estonia’s raised profile in the region is due to the country’s proximity to Russia, where the future of cryptocurrencies continues to be uncertain, despite Vladimir Putin’s recent comments on adopting a state crypto-rouble, according to Entrepreneur Europe. This makes neighboring states an attractive proposition for Russian investment.
Lithuania has recently become a growing center for ICOs and crypto projects. Latest figures show that Lithuania is now attracting an impressive 10% of all global ICO investments, with cryptocurrency bringing in half a billion euros from such activities.
The greatest cryptocurrency success story of all has to be ex-soviet state Georgia which has now reached the lofty accolade of becoming the number two crypto mining location in the world. Wedged between two giant economies on the top ten mining charts, China and the US, Georgia has utilized cheap hydroelectricity and friendly regulations to create its current standing. However, US company, BitFury controls most of the mining activity supported by the Georgian government through preferential tariffs and a waiver on the payment of value-added tax.
The poor economic conditions of the country, with many Georgians living below the national average of USD 400 a month, it is unsurprising that cryptocurrency mining has been identified by the fast money associated with digital currencies. Georgia is among several jurisdictions in the post-Soviet space that have been attracting crypto miners with friendly regulations and low operating costs. In terms of mining profitability, the country ranks second only to China.
Such is the demand for mining Bitcoin in the old Soviet region that the consumption of electricity has become a worry for some government regulators. In Abkhazia, recognized as an independent state by Russia, but part of Georgia by UN decree, the situation has become strained due to cryptocurrency mining. As a result, the Republic of Abkhazia has now cut power to some of the cryptocurrency mining farms in the region in order to conserve energy and as part of a series of “temporary measures to limit the consumption of electricity by certain categories of subscribers.”
Given that Bitcoin continues to hold its own on cryptocurrency markets, the future of many ex-Soviet nations is best approached from out in the cold.
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