Issue 5, 2017. October-November

   

FARMING FOR CURRENCY: GEORGIANS WADE INTO BITCOIN MINING

Bitcoin farming-the process of using computers to mine the digital currency-is slowly catching on in Georgia, especially among IT specialists.

Nino Bakradze

No one controls Bitcoins. They aren't printed like dollars or euros and manipulated by a central bank; they're produced by people and businesses all over the world-and have become a new source of income for a growing number of Georgians.

Bitcoins are created by running computers with software that solves mathematical problems.

Very strong servers can solve these problems quickly and their given owner periodically gets a new Bitcoin in his or her wallet account.

One bitcoin currently costs $4,450.

Georgian Bitcoin Farmers

The digital currency is gaining popularity in Georgia: the leading Bitcoin-mining company in the world owns two facilities in Georgia and says the business is successful.

Today, Georgian entrepreneurs are also generating digital currencies by the help of machines installed in their homes. The Bitcoins they mine can be converted into Georgian lari.

There are no statistics on how many Georgians are mining Bitcoins or other forms of digital currency, but anecdotally, the number is increasing. Gaga Chikhladze has been generating Ether, another type of digital currency, for six months out of his home in Kutaisi.

Ether is the second most valuable form of digital money after Bitcoin. The technology it runs on is called Ethereum, which was first described by 19-year-old Bitcoin programmer Vitalik Buterin in 2013. Like Bitcoin, it is a decentralized payment network, which is not controlled by a bank or other third party. Like Bitcoins, Ethereum uses the same blockchain technology, and transactions are visible for everyone on the network.

Chikhladze said he decided to generate-or "farm"-Ether because the process is less expensive than Bitcoin mining. "This process requires less electricity and time, so it is more profitable. It was easier to buy the video cards that the computer needs to generate the currency when I started this process. Now a lot of people want to start this activity and the price of video cards has increased. Today it is very difficult to find the [necessary] video card and if you still find it, it is so expensive that it is no longer worth buying. In recent months, there has been a boom in generating cryptocurrency. In Kutaisi alone, I assisted my six friends to arrange a "farm" at their houses," Chikhladze told Investor.ge.

Surfing for Bitcoins

Dato Natsvlishvili, who created the web and Facebook page called "How to Earn Bitcoins" for people interested in this activity, tries to generate digital currency without expensive equipment. Currently, his page has over 300 followers.

Natsvlishvili calls the process "surfing" and explains the rules and procedures to newcomers through his Facebook page. To earn Bitcoins through "surfing," people visit different web-pages and watch advertisements. In return, they receive Satoshi (a small amount of Bitcoin) in their digital wallet (account). "Generating Bitcoin may take up to one year through surfing, but you do not have any costs. I started my Facebook page for people who do not have enough money to buy special equipment for mining, but still want to earn Bitcoins," Natsvlishvili told Investor.ge.

He says he decided to create a webpage about the process in August because people were asking him for help. Now demand has increased and he has plans to further develop his site and Facebook page-and perhaps start earning money from the advice he provides.

Three other Facebook pages run by Georgians also publish information about the Bitcoin industry to over 15,000 followers, collectively. Mostly the so-called "farmers" are IT specialists, who are skilled enough and know how to mine digital currency. They treat mining as an additional income and worth investing money in.

Bitcoin Cash vs Bitcoins

On August 1, some of the miners and developers initiated-effectively created-a new currency: Bitcoin Cash. Bitcoin Cash has implemented an increased block size of 8MB, to accelerate the verification process, through which miners could get more cryptocurrency in less time.

On the other hand, Bitcoin Cash requires more computer storage space from people who want to take part in the mining process.

"Bigger players with access to server farms and big budgets will have no problem running bigger nodes, but smaller operators could be squeezed out," said Dr. Garrick Hileman, research fellow at the Cambridge Centre for Alternative Finance, to the BBC.

Bitfury Group is one of the biggest Bitcoin mining-companies, which runs two such facilities in Georgia, one in Gori and another in Tbilisi, where thousands of servers are working.

Giorgi Efremidze from the Bitfury Group told Investor.ge that his company is focused only on Bitcoin mining and they do not treat Bitcoin Cash as Bitcoin's competitor.

"Two days after the split, the price of Bitcoin Cash was already up to 400 dollars. It even cost 700 dollars within the first 72 hours. However, the equilibrium point was found quickly and the price of Bitcoin Cash is ten times less than the price of Bitcoin.

Bitcoin Cash is an independent cryptocurrency like the other 900 cryptographic currencies on the market today; the basic alignment on price is still in relation to Bitcoin as it is the world's largest cryptocurrency with the highest capitalization," says Efremidze.

Generating Bitcoin Cash is not very popular with Georgian miners yet, Investor.ge found, although many say mining for digital currency is worth the time and cost. Gaga Chikhladze, the Ethereum miner, says that he can generate $200-300 dollars' worth of Ethereum monthly, which he later converts into Bitcoins. He is saving this money for the future, when Bitcoins will hopefully be worth even more.

A Brief History of Bitcoin

Bitcoin dates back to 2008, when the paper "Bitcoin: A Peer-to-Peer Electronic Cash System" was posted on a cryptography mailing list under the name Satoshi Nakamoto.

The paper outlined how a peer-to-peer network could creat "a system for electronic transactions without relying on trust," according to a Wikipedia article on Bitcoin.

The digital currency was first mined in 2009 by Nakamoto, which is believed to be a pseudonym for one or several people; the same year the first open source Bitcoin client was released.

By 2011, other cryptocurrencies were being created and traded.

In the same year, Bitcoin began to be accepted as payment by some organizations, including WikiLeaks.

Over the next two years, Bitcoins gained in worth and popularity. By 2013, some governments were already declaring them illegal. The same year, the US became the first government to announce it had seized Bitcoin.

In 2014, a casino in Las Vegas announced it would accept Bitcoin, Wikipedia cited USA Today as reporting.

The digital currency continued to gain acceptance around the world in 2015 when Barclays announced it would be the first UK high street bank to accept Bitcoin. Wikipedia said that, as of August 2015, it was estimated that 160,000 merchants accepted Bitcoin payments.

By 2017, Japan passed a law accepting Bitcoin as a legal payment method.

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