Georgia’s Growing Interest in Blockchain
To many, the words “Bitcoin” and “cryptocurrency” conjure images of the San Francisco tech industry and developing digital markets; most would not immediately point to Georgia, which has risen to become one of the world’s largest miners of Bitcoin over the past five years. On June 17, the South Caucasian country revealed a partnership with Input Output Hong Kong (IOHK) to implement blockchain technologies across its ministries, and a plan to use blockchain-based verification systems within state apparatuses.
The Early Crypto Market: A Forerunner
Bitcoin and Bitcoin mining began in 2009, the product of the anonymous Satoshi Nakamoto, and the world’s first blockchain ledger based currency. The first sale of Bitcoin occurred in 2010, and was followed by a growth in rival decentralized cryptocurrencies including Ethereum and several others – today there are over a thousand cryptocurrencies available. During the second decade of the twenty-first century, Bitcoin witnessed an explosive growth, and Georgia was not slow in taking advantage of what many saw as a means of making “cheap money.”
Bitfury, the second-largest Bitcoin mining entity on the planet after Bitmain Technologies Ltd., houses its principal super-cooling facility in the Caucasus mountains. The plant submerges 40 megawatts of computing power in 160 cooling tanks of a non-conductive liquid called Novec. The liquid, which has been used to stop race car fires, can reduce cooling requirements by 95 percent, and will likely change the future of how firms operate and cool high-capacity computers. With high temperatures managed, the plant can mine Bitcoin seemingly indefinitely and operates under Georgia’s lax tax laws and regulations. Cheap hydroelectric power allows Bitfury to remain “bullish” in the Bitcoin mining race, according to Chief Executive Offices Valery Vavilov. Through the creation of special economic zones where electricity and mining aren’t taxed, Georgia has attained the fastest growing electricity consumption per capita in Central Asia and Eastern Europe at 10 percent of electricity supplied to mining activities.
However, Bitfury unknowingly became tangled in the politics of Georgia after being incentivized to move to the small Caucasian state with a $10 million loan in 2015 from then-Prime Minister Bidzina Ivanishvili. After the plant was sold, political opponents alleged that he had benefited from the transaction and from Bitfury’s operations. Company executives claim that the sale was strictly motivated by business factors, not politics. Regardless of the intentions, the plant has continued its operations under Georgia’s favorable business conditions, ranked sixth on the Ease of Doing Business index produced by the World Bank Group.
Public Sector Blockchain Possibilities
The Georgian National Agency of Public registry and Bitfury agreed to the implementation of blockchain technologies in public land registry in 2017. Both argued that the program had the capacity to be used in mortgages, sales of land titles, and registration of titles; with a time stamp and proof-of-modification to any document and title, the Bitfury’s blockchain technology would afford a new level of security to public information. Georgia’s Ministry of Education and Science and IOHK additionally signed a Memorandum of Understanding (MoU) on June 17, 2019 which will allow for the building and support of blockchain projects in both the private and public sectors. The Free University of Tbilisi, which hosts over 2,000 students annually, will introduce a blockchain-based credential verification system using technology produced by IOHK. The government of Georgia has stated that in verifying national student assessments, this type of technology could be particularly useful.
IOHK created the cryptocurrency Cardano (ADA) to be the first research-driven protocol, with a provably secure, peer-reviewed algorithm – the type of technology perfectly suited for government use. In Ethiopia, Co-founder of Etherum and Cardano Charles Hoskinson, introduced the latest system, Atala, which he hopes will provide financial services to millions across Africa. The blockchain system, which keeps record indefinitely, could be used for deeds, voting systems, and supply chain management. This framework will be used to create a payment system in Addis Ababa, which Hoskinson hopes to eventually link to an identity card. Atala, if implemented in Georgia, could expose the country’s nearly four million citizens to ADA as a usable and secure cryptocurrency. As a state accustomed to Bitcoin operations, and with blockchain technologies already in place in parts of the public sector, this latest MoU marks just one more step that Georgia has taken toward improving its positioning in a tech-oriented global market.
Implications and the Future
Georgian Prime Minister Mamuka Bakhtadze finished a ten-day tour of the United States on June 15, with visits in Washington D.C., San Francisco, and Seattle. The tour, which sought to raise awareness for U.S. involvement in the region and the two countries’ ongoing partnership, highlighted Georgia’s commitment to rule of law and economic advancement. Prime Minister Bakhtadze finished his remarks in Seattle by noting Georgia’s current positioning toward startups and innovation, a comment supported by its involvement of the tech sector in human capital development through education. If Georgia continues to implement blockchain technology in state operations, it will likely continue to grow as a regional, technologically progressive economy, and to be a strategic U.S. ally in Eurasia.