Issue 2, 2017. April-May

   

GEORGIA BECOMES FIRST COUNTRY TO REGISTER PROPERTY ON BITFURY'S BLOCKCHAIN

A new agreement between Georgia's Justice Ministry and Bitfury is aimed at making property registry more secure and more transparent.

Nino Bakradze

Bitfury, a leading bitcoin mining company, and the Georgian Ministry of Justice are working on a project to use blockchain technology to make property registration more transparent.

"All new property registration and land title updates have been done by using the blockchain system since February 2017, and it does not cost anything for our citizens. We are keeping the old prices for the land registration process. But data is more secure, since nobody can change information that is placed on the blockchain," Papuna Ugrekhelidze, the Head of the Agency of Public Registry under the Ministry of Justice told Investor.ge.

The idea behind the initiative came from Bitfury, according to the Public Registry, and Georgia will be the first country to use this technology to register property.

The new procedure is the same as before, but now the records will automatically be stored on Bitfury's blockchain.

Eprem Urumashvili, who represents Bitfury Group in Georgia, noted the agreement will reflect well on the country. "Forbes International and other leading business journals evaluate the Georgian government as the most innovative in terms of using blockchain technology. This is the best advertisement and a good opportunity to attract international investors here," pointed out Urumashvili in his interview with Businesscontract.ge.

Ugrekhelidze says it was Bitfury Group's interest to work on this project, since the Public Registry uses modern technologies and has a well-developed system. "Initially, the first pilot phase of this partnership was successful and after that we decided to develop this idea. In February we started the second phase, which means to place real contracts on the blockchain, and so far it is going well. We do not have any technical problems, and we do not see any risk that project might fail or something wrong might happen," Ugrekhelidze told Investor.ge.

What is blockchain technology and how does it work?

A blockchain is a type of database, comprised of unchangeable, digitally recorded data in packages called "blocks." These digitally recorded "blocks" of data are stored in a linear chain. Each block references and identifies the previous block by a hashing function and forms an unbroken chain.

Basically, a blockchain is simply a way to store information and no outside actor change or destroy it. The blockchain keeps all information in the database and if you know the hash (the mathematical formula of the transaction) you can find the information in the database and look at it.

The block validation system ensures that nobody can destroy, steal or change records. Old transactions are stored forever and new transactions are added to the ledger permanently. Anyone on the network can check the database and see the same transaction history as everyone else.

Blockchain technology originally was invented for Bitcoin transactions. Bitcoin is a cryptocurrency created by Satoshi Nakamoto (the name is a pseudonym) in 2007.

No one controls Bitcoins. They aren't printed, like dollars or euros - they're produced by people, and increasingly businesses, running computers all around the world, using software that solves mathematical problems.

How Does Bitcoin Work?

The Bitcoin system is designed as an alternative to the world banking system. For example, if a person in Greece wants to transfer money to Georgia using the Bitcoin system, which is cheaper and faster because there is no bank commission fee, a Bitcoin processing facility records the transaction using blockchain. With the help of special software, anyone can mine Bitcoin, but this process might become real business for mining companies who run Bitcoin processing facilities.

Mining is the process of obtaining Bitcoins: if you have a server and have a Bitcoin wallet (an account in the system), you can program your computer and it will check and confirm transactions made in Bitcoins. Every transaction generates mathematical algorithms, so-called "problems" and servers solve these problems.

Very strong servers can solve these problems quickly and the owner periodically gets a new Bitcoin on his/her wallet account.

Bitfury has thousands of such servers in Georgia.

Because their servers are strong, they can solve such algorithms faster than servers held by individuals.

Background on Bitfury

BitFury runs two such facilities in Georgia, one in Gori and another in Tbilisi. The Georgian Co-Investment Fund (GCF) issued a $10 million convertible note in 2014 to help finance the first center in Gori. The GCF was founded by former Prime Minister Bidzina Ivanishvili in 2013 soon after he resigned from office. Bitfury was able to buy a prime 18-hectare land plot in the Gldani region of Tbilisi in 2015 from the Ministry of Economy for the token price of 1 lari (now about $0.40). The market value of the land at that time was over $819,000. In October 2015, the Georgian government gave Free Industrial Zone (FIZ) status to that land, and the company quickly built a larger center.

Today, with the three facilities operating in Gori, Tbilisi and Iceland, BitFury is, by all measurements, already one of the largest Bitcoin processing companies in the world. Its daily revenue sometimes exceeds $120,000. Based on stated capacity, the FIZ operation in Tbilisi should produce about 50 percent of that daily revenue. (The Gori operation and a third Bitfury operation in Iceland should produce the other 50 percent).

The agreement between the company and Ministry of Justice marks BitFury's first project outside of the hardware and mining that have made the company's reputation since its founding in 2010.