Georgia has become a behemoth when it comes to cryptocurrency mining activities. The country is currently ranked second after China in regards to the mining of various cryptocurrencies.
The tiny nation of about 4 million people is increasingly attracting people and corporations from all walks of life, thanks to its generous electricity rates that make mining ventures affordable and profitable. Buildings in the country are increasingly being turned into data centers for mining digital currencies.
Compared to last year, returns from the mining activities have significantly dropped. However, that has not stopped people from venturing into the mining business, given that it is still profitable despite the recent plunge in cryptocurrencies prices.
Georgians are not the only ones venturing into the mining business. Bitfurry, a U.S based technology company, is one of the biggest players accounting for much of the mining activity in Georgia. The company operates a vast data center filled with computer servers in the outskirts of the capital Tbilisi.
The company has come under criticism recently on reports it was using 28 million kilowatt-hours of electricity a month, equal to the average consumption of 120,000 Georgian households. The fact that the company pays significantly less, per unit of power consumed, has not gone well with most Georgians.
Bitfurry is not the only company as scores of other small data centers, both local and international, have sprouted up to take advantage of the generous electricity rates. Even a Georgian political party has also ventured into the cryptocurrency mining business.
Cryptocurrency mining consumes a lot of electricity as it involves the use of sophisticated and powerful computers to solve complex mathematical puzzles. Given that the process of solving the puzzles can run hours, or even days, electricity costs can grow steadily. A computer that finds the right solution to a puzzle is usually rewarded with a block of bitcoin or other cryptocurrency.
Concerns Over Crypto Craze
The cryptocurrency mining craze continues to elicit mixed reactions. While others believe it stands to propel the country on the adoption of new technologies, others fear it could have serious repercussions.
Skeptics have raised concerns that the country is increasingly becoming an outsourcing center for the crypto space with few jobs being created. Other fear that the country could suffer immensely should the cryptocurrency business come crashing.
The country’s central bank, The National Bank of Georgia, has already warned people to exercise caution when it comes to cryptocurrency investing. “This is high-tech gambling. The profits just go offshore,” says Professor Gocha Tutberidze, a former regulatory official with the bank.