[2019-01-23]Tax breaks, land deals and cheap energy. Mining in Georgia

[vit05]

nytimes
Despite Bitcoin’s Dive, a Former Soviet Republic Is Still Betting Big on It
Tax breaks, land deals and cheap energy have spurred cryptocurrency mining in Georgia, which wants to be a digital data leader.

Georgia — For three years, a windowless warehouse on the edge of town has been whirring with enough energy to power nearly 50,000 homes. Day and night, the warehouse, and dozens of cargo containers in a windswept valley, are generating Bitcoin, the cryptocurrency that has created a virtual gold rush in the former Soviet republic of Georgia.

Bitfury, an American technology company, is churning out millions of dollars’ worth of the digital money using ultracheap hydropower harvested from waters rushing down the volcanic peaks of the Caucasus. Even as the currency has tumbled in value, thousands of Georgians have jumped into the game and sold cars — even cows — to buy high-powered computers to mine Bitcoin and join what has become a state-supported dash toward data supremacy.

A former prime minister encouraged Bitfury with a $10 million loan in 2015. The governing Georgian Dream party sold 45 acres for $1 for Bitfury to set up shop. The government has been selling energy at half the rates charged in the United States or Europe, and it has created tax-free zones to draw in tech-savvy entrepreneurs.




Mr. Urumashvili brushed off such concerns. “Bitfury has given our country many things, including a path to the future,” he said. “When you have a ticket to get onto the world map,” he added, “you should use it.”


Great New York Times article. Clearly, there is a lucrative relationship between politicians and Bitfury. And for that reason, it receives so many incentives. But it is also interesting to note how Bitcoin can be useful to the economy of regions that are away from the great centers.

[gentlemand]

Fascinating stuff.

Fostering stuff like this must be very tempting to smaller and hungrier economies. I do wonder how willing they'd be to make their populations subsidise it as is hinted at the end of the article. There's a possibility of miners treating it rather like strip mining - turn up, drain the local economy of as many benefits they can squeeze out of it in the name of 'the future' and then leave behind a load of waste and layoffs when they get a better offer.

And it seems a bit batty of the locals to attempt to go up against Bitfury, let alone all the other biggies.

[squatter]

Fostering stuff like this must be very tempting to smaller and hungrier economies.

Yup, it's similar to Malta's move to grab market share in the cryptocurrency service licensing industry. Malta pushed hard into online gaming licensing too during the online gambling boom and now it comprises 12% of their GDP. Small nations with limited resources need to pounce on these kind of opportunities. Mining and hardware production could similarly become a major portion of Georgia's national GDP. 

There's a possibility of miners treating it rather like strip mining - turn up, drain the local economy of as many benefits they can squeeze out of it in the name of 'the future' and then leave behind a load of waste and layoffs when they get a better offer.

Without low enough costs (including subsidies), miners will move elsewhere. But the effects of using largely excess power (hydroelectric) on the environment are nothing like strip mining operations.

[gentlemand]

Without low enough costs (including subsidies), miners will move elsewhere. But the effects of using largely excess power (hydroelectric) on the environment are nothing like strip mining operations.

Obviously I don't mean strip mining in the literal sense. I do mean opening the door to operators who'll come in and milk things as intensely as possible and then bugger off having contributed nothing to the jurisdiction that lured them there other than exploiting the subsidies paid for by the little people.

I don't think some local governments are realising how hungry, fleeting and predatory mining operations are. It's not like building an ongoing business that's going to settle in and thrive. They're more like locusts who'll move on once everything's been consumed.

If they're OK with that from the off then cool. I'm not sure they are.

[squatter]

Without low enough costs (including subsidies), miners will move elsewhere. But the effects of using largely excess power (hydroelectric) on the environment are nothing like strip mining operations.

Obviously I don't mean strip mining in the literal sense. I do mean opening the door to operators who'll come in and milk things as intensely as possible and then bugger off having contributed nothing to the jurisdiction that lured them there other than exploiting the subsidies paid for by the little people.

I don't think some local governments are realising how hungry, fleeting and predatory mining operations are. It's not like building an ongoing business that's going to settle in and thrive. They're more like locusts who'll move on once everything's been consumed.

If they're OK with that from the off then cool. I'm not sure they are.

There's a lot of excess generated electricity that would otherwise be wasted because it's difficult to efficiently store. Hydroelectric power during wet seasons is a good example. Mining operations can definitely have a symbiotic relationship with power plants if only as a matter of load balancing.

The ideal is to create the proper incentives (and perhaps disincentives) to drive miners towards excess capacity, where they can work with power plants to soak up excess power without spiking demand. Right now, miners just go where it's currently cheap -- probably with little regard for grid capacity -- and then they drive up everyone else's generation costs and/or threaten the entire power grid. That's a problem.