Issue 2, 2018. April-May

   

CRYPTOCURRENCIES, BLOCKCHAIN TECHNOLOGY CONTINUES TO EXCITE ENTREPRENEURS IN GEORGIA

Georgia has been on the forefront of blockchain technology and cryptocurrencies, starting in 2014 with the BitFury investment, and continuing to the government's pilot project on using blockchain technology in the public registry.

Inge Snip

Last year, Georgia was one of the top three countries in the world in cryptocurrency mining.

Bitcoin was regarded as a shady innovation for criminals and off-the-grid communities in much of the world just a few years ago. But Georgia was early to realize its potential: by 2014 it had already pioneered mining with Bitcoin and blockchain company BitFury, which opened a mining center in Gori.

More investment in the technology followed: $100 million by BitFury to open a datacenter in Tbilisi for mining, and a pilot project in 2016 recording land titles on Bitcoin's blockchain-the technology used for cryptocurrency transactions.

'The benefits of implementing blockchain in government registration and transactions are an increase of reliability and security,' Papuna Ugrekhelidze, Chair of the National Registry, tells Investor.ge.

'Our citizens are more secure by sending exact information into the Bitcoin network, because the exact information is saved on the Bitcoin network,' he explained.

And Georgian entrepreneurs have not wasted any time jumping into the cryptocurrency world as well. Several private mining centers have popped up all over Georgia, with -among others-BF Group starting a mining center at the Tbilisi Free Zone, which is currently offering 5 MW of hashing power, the X4CORP mining centre in the Kutaisi Free Industrial Zone hashing at 20 MW, and Golden Fleece token plans for a mining center in the Poti Free Zone. Others offer cryptocurrency exchange, such as Spotcoin, or cloud mining, such as BitForx.

International Trend

The growing cryptocurrency world has central banks worldwide worrying they may lose a battle if they do not join the cryptocurrency race as well. With more than 12 million Bitcoins in existence, amounting to a market capitalization of $148 billion, the question indeed arises what the role of central banks should play. In China, the People's Bank of China has prototyped their own cryptocurrency, whereas the Bank of Japan and the European Central Bank started to jointly research the possibility to utilize distributed ledgers for market infrastructure. Moreover, having developed its own cryptocurrency for internal use, the Dutch Central Bank is attempting to follow suit, and Russia has been flirting with Ethereum (another type of cryptocurrency), including a pilot program on blockchain by its central bank. The former Chairperson of the Federal Reserve argued that cryptocurrencies show a 'long-term promise,' and is a keynote speaker at an event of one of the largest alt-coins, Ripple, on banking.

The latest countries on the list are Venezuela and Turkey, with the former's national cryptocurrency having been recntly banned in the US. Georgia's breakaway Abkhazia is also considering cryptocurrency as a funding mechanism through an Initial Coin Offering.

The Georgian National Bank, however, does not seem to be as eager to jump onto the cryptocurrency wagon. In December 2017, it warned 'citizens to be cautious when dealing with cryptocurrencies' adding that 'the anonymity of cryptocurrencies attracts illegal entities and activities like money laundering.'

Beka Vashakidze, CEO of BF Group tells Investor.ge that he expects the government to put certain regulations into play. 'I think in the near future they will consider it as normal manufacturing, and they might tax it.'

And a healthy worry is warranted. A landlord in Georgia, who wished to remain anonymous, told Investor.ge that a mining data center on his land refused to pay a 30,000-lari electricity bill when it came in. 'They all started buying Lamborghinis and other fancy cars, but the moment we told them to pay for electricity, they were nowhere to be found,' a worried landlord tells Investor.ge, adding that fortunately the situation has been resolved.

Another major issue are Initial Coin Offerings (ICOs)-when a company offers a quantity of cryptocurrency to investors in the form of 'tokens' in exchange for other cryptocurrencies to fundraise for new projects. ICOs have proven to be a risky endeavor: on more than one occasion, companies offering their tokens shut down immediately after raising funds, leaving the investors empty-handed. It is no surprise that both Facebook and Google have banned ads for ICOs, and Twitter is planning on one as well.

Secure and Transparent

But while cryptocurrencies and exchanges may be volatile, the underlying blockchain technology is still the most secure and transparent system to exist to date. And the Georgian government agrees.

Beqa Avaliani, senior project manager at 4XCORP tells Investor.ge that there are several blockchain-based projects under development at the company. One of them seeks close cooperation with the Georgian government. 'Although the technology is young and developing every day, it truly is the future of the world we will see tomorrow,' he says proudly.

GEORGIA'S DIGITAL CURRENCY LANDSCAPE

Mining:
BitFury
4XCORP
BF Group
Crypto Invest Hub

Hosting/Cloud:
Ambit Mining (ICO in April)
BitForx

Exchange/Wallet:
Spotcoin (ICO in May)
UniPay
Ushba.io (ICO last Fall)
VISO (ICO started last fall)
DigiWallet

Other Crypto/block Chain Related Projects:
Aisi

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