By: Claire Halloran
Welcome to Bitcoin, Bubbles, and the Blockchain. This is a column focused on the world of cryptocurrencies and the future of digital capitalism.
As the popularity of cryptocurrency grows, so the demand for energy resources needed to mine crypto-coins. Across the world, experts are seeing the creation of “crypto-valleys”. The official Crypto Valley is located in Zug, Switzerland, but similar towns are being formed when miners relocate to take advantage of cheap energy and space. Bitcoin mining alone already eats up an estimated 20,000-gigawatt hours of electricity per year, which is about .1% of the global generation, or as much as used by the entire country of Ireland. Today, we will look at three of the major crypto towns, and their impact on the communities.
Located half an hour drive outside Zurich, the small town of Zug has gained global attention for its business-friendly taxation scheme, making it the perfect home for thousands of companies, and now, Crypto Valley.
In the past few years, around 200 high-tech blockchain companies have established themselves in Zug, including the foundation behind Ethereum, the second largest cryptocurrency. Out of the world’s six biggest ICOs last year, four took place in Switzerland, according to Swiss financial watchdog Finma.
Zug has also embraced crypto by accepting bitcoin payments for council services. However, it has created a worry of money laundering for locals, and Switzerland’s banking sector has been divided on how to deal with the rush of digital currencies. In fact, Switzerland’s two largest banks, UBS and Credit Suisse, have completely avoided getting involved in the cryptosphere.
Republic of Georgia
The small country of Georgia, a nation with about the same population size as Los Angeles, California, the cryptosphere is thriving. It is a hotspot for crypto companies due to its electricity subsidies, with some regions already having lower rates for electricity, to begin with. The country, which relies on cheap hydropower, has brought in several foreign investors interested in taking advantage of the cheap power supply to mining large amounts of digital currencies.
BitFury, which reportedly controls most of the mining activist, is interested not only in the cheap power but the preferential tariffs and a waiver on the payment of value-added tax in Georgia.
While some have dismissed the large attention the country has gained from foreign investors as just due to industry hype, others are concerned that the cryptosphere will bring unwanted controversy and corruption. The biggest concern is if Georgia natives will actually gain anything from the cryptocurrency mining, as it has largely been dominated solely by foreign companies. It is reported that there are a growing number of local prospects growing in Georgia, but critics worry that preferential treatment could threaten their success.
BitFury has denied allegations of corruption in Georgia, including rumors that the country’s former Prime Minister Bidzina Ivanishvili is linked to the company.
To better community relations, BitFury has partnered with the Georgian National Agency of Public Registry in a blockchain land titling project and has been attempting to create a more socially responsible corporate image.
East Wenatchee, Washington
Georgia isn’t the only place using the low costs of hydropower to fuel the cryptosphere. In the United States, the crypto-craze has gone to East Wenatchee, Washington to set up the show. Power in the rural town is cheap, due to the hydroelectric dams on the Columbia River, giving miners the opportunity to buy power for cheaper than anywhere else in the country.
The cheap power, coupled with empty fruit factories, shut down car washes, and other vacant buildings looked like a cryptocurrency heaven for miners such as Lauren Miehe, one of the original crypto settlers in the town.
But, like in Zag and Georgia, not everyone is happy. The arrival of cryptocurrency miners has brought tension between the crypto community and locals, bankruptcies and bribery attempts, and a battle over maxing out the local electrical grids.
Thanks for checking out Bitcoin, Bubbles, and the Blockchain. Check back throughout the summer for the latest news on the world of cryptocurrencies and digital capitalism.
Michael is an award-winning radio host at WHIP Radio. He has been a staple host on WHIP’s Wake Up Call, and has recently occupied the role of Program Director for the station.