Issue 4, 2015. August-September

   

BITFURY: GEORGIA'S TICKET TO THE WORLD'S "TECHNOLOGY AND INNOVATION MAP"

BitFury, a prominent bitcoin mining company, is putting Georgia at the center of the international bitcoin movement with its latest investment in the country - a technology park in Tbilisi.

Maia Edilashvili

Over the past year, Georgia has become a player in the international world of bitcoin, the world's most prominent virtual currency. BitFury, a bitcoin mining company, opened one center in Gori in 2014 and is planning a new investment in Tbilisi this year.
While the bitcoin industry is still developing, investors hope Georgia's role as a mining center will help create a name for the country as a destination for high tech companies.

How does it work

Bitcoin limits the availability of its currency by requiring new currency generators to run complex algorithms. Processing the algorithms, or "mining" costs money, principally in electricity to run and cool the computers which need extremely fast and powerful processors. If the ultimate value of the bitcoins produced is greater than the electricity running costs, then bitcoin mining is profitable. Georgia is, therefore, attractive to this sector as it has relatively cheap electricity and an open regulatory environment.

Georgia's Ticket to High-Tech Innovation

"Having one of the world's leading fully integrated Bitcoin Blockchain infrastructure providers and transaction processing companies base its operations in Georgia puts the country on the world's 'technology and innovation' map," George Bachiashvili, the CEO at the Georgian Co-Investment Fund, told Investor.ge.

The fund is one of the investors in the project.

"We believe this will certainly bring in goodwill and awareness that may in turn translate into additional investments and jobs creation, which is the top priority of the country's leadership," Bachiashvili said.

BitFury is among the world's leading providers of semiconductors, servers and data-center solutions for bitcoin and cryptocurrency processing, which is known in the industry as "mining."

Unlike conventional currencies like the lari, the dollar, and the euro, which are supplied by central banks, anybody may produce their own bitcoins.

To prevent inflation and devaluation, there are special rules to create or "mine" a new bitcoin. Companies like BitFury handle the complicated and expensive computations necessary to mine bitcoin.

When BitFury picked Gori, about a one-hour drive from Tbilisi, as a location for its new 20MW data center, the Georgian Co-Investment Fund underwrote a $10 million convertible note issued by the company for the project.

In total, the Georgian Co-Investment Fund invested $15 million in BitFury's Gori project.

Eprem Urumashvili, who represents BitFury Group in Georgia as a client of his law firm, Nodia, Urumashvili & Partners, told Investor.ge in an email interview that the company is enthusiastic about being in Georgia.

"We, together with many prominent investors and venture capitalists, believe Bitcoin is the next internet and we are still in the early stages...the future is bright and this technology holds great promise," Urumashvili said.

BitFury chose Georgia for its low energy costs and because a large percent of Georgia's electricity comes from renewable resources, namely hydropower, CEO of BiFury Valeri Vavilov said, adding that the competitive labor market, attractive investment climate, and ease of conducting business also played a role. "Georgia has an efficient regulatory system, simplified tax regulations and no corruption," Vavilov said.

In addition, BitFury has personal links with Georgia: the vice chairman of the board, Giorgi Kikvadze, is the fund's managing director.

Bitfury currently employs 25 Georgians in the Gori facility and plans to double this amount once the company expands to Tbilisi.

For its new project, BitFury acquired a 185,000 sq. meter plot of land located in Tbilisi's Gldani District.

The company will be the first tenant in the Georgian Technology Park, where it will build a mega data center with up to 100 MW energy capacity to process transactions using its latest generation 28-nanometer and the upcoming, next-generation 16-nanometer bitcoin mining ASIC chips.

Construction on the technology park will begin in August 2015.

Currency of the Future?

In Georgia,bitcoins are available through Liberty Bank EMoney.

"Soon we believe there will be the option to buy bitcoins via bitcoin ATMs in Georgia," Urumashvili noted.

Since its commencement, around $860 million of venture funding has been channeled into the industryworldwide. There are over 4,500 bitcoin-driven startups around the world.

There are 9 million bitcoin users now, up from 3 million a year ago, and over 100,000 merchants accept bitcoin today, an increase from 5,000 a year ago. Hundreds of retailers accept bitcoin as payment for goods and services, including such large merchants and websites as Overstock.com, Dell, Wikipedia, Virgin Galactic, Expedia, Newegg, Bloomberg, OkCupid, CheapAir.com and Reddit.

"There are hundreds of local coffee shops, retail stores and restaurants all over the world that accept it [bitcoin]," Vavilov said. "It is popular because the transaction fees charged to retailers are much less than that with Visa or MasterCard. We believe bitcoin adoption will continue its upward trajectory."

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