The New York Times: Bitcoin declines but Georgia still bet on it
23 January, 2019
The New York Times: Bitcoin declines but Georgia still bet on it
The New York Times has recently published an article about reasons, challenges and causes of generating Bitcoin in the former Soviet country Georgia. Bitfury, an American company set up a Bitcoin mining center in Tbilisi (the capital of Georgia) due to cheap land and electricity available in Georgia. The warehouse and dozens of cargo containers on the edge of town generate Bitcoin all day long.

The company makes millions of dollars’ worth of Bitcoin (the digital money) using ultracheap hydropower harvested from waters
rushing down the volcanic peaks of the Caucasus.

“A former prime minister encouraged Bitfury with a $10 million loan in 2015. The governing Georgian Dream party sold 45 acres for $1 for Bitfury to set up shop. The government has been selling energy at half the rates charged in the United States or Europe, and it has created tax-free zones to draw in tech-savvy entrepreneurs.”- says the author of the article Liz Alderman.
bitfury
Bitfury’s Bitcoin computers

Despite the decline in value, thousands of Georgians involved in the game, sold cars and cows to buy high-powered computers to mine Bitcoin. George Kirvalidze, 35, the former owner of a small internet company in the town of Kvareli, Kakheti (eastern region of Georgia) is one of those joining the experiment.

“To save energy, Mr. Kirvalidze created a mining pool with nine friends, who grouped their machines in a friend’s garage. One November afternoon, 15 of the 60 miners were turned off because Bitcoin prices had fallen too low to justify the energy use. More would shut down if prices continued to slump, he added.”

As most Bitcoin companies face challenges now as the currency has tumbled in value, Georgia may soon follow. The country, however, has been betting its economy on the luring game. Georgia intends to outdo Malta, Bermuda and other countries famous for the lax regulation of cryptocurrencies to foster blockchain development.

“The economy’s digital transformation is our highest priority,” said George Kobulia, the economy minister. “We’re supporting this any way we can.”

After the Rose Revolution in 2003, Georgia tried to combat poverty, corruption and grinding bureaucracy. The country represented itself as a business-friendly low-tax place for investment. In 2011, Valery Vavilov, the co-founder, and chief executive of the Bitfury from Latvia set up the company. Remi Urumashvili, a lawyer and the main representative of the company recalls the company leader’s explanation of the currency:

“They explained that it’s money that exists on the internet,” he said. “So I said, ‘If a thing doesn’t exist in reality, maybe the tax will be zero.’”

As soon as the company was launched, Georgia created “free economic zones” where mining activities and electricity weren’t taxed.

Rumors had it that Bidzina Ivanishvili was a secret beneficiary of the digital experiment giving Bitfury a $10 million loan. Mr. Urumashvili claimed that “no laws had been violated to encourage Bitfury, and that the former prime minister’s loan had been paid off. He had no other ties to Bitfury.”
ivanishvili_house
The house of the former prime minister Bidzina Ivanishvili

The government even enlarged an entire power station next to the Bitfury facility to pump in electricity at no extra cost. Zurab Tchiaberashvili, a lawmaker from the largest opposition party in Parliament, claimed that “the government’s generosity toward Bitfury had deprived Georgians of millions in tax revenue.”

Source: Despite Bitcoin’s Dive, a Former Soviet Republic Is Still Betting Big on It

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