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What is the role of mining in Georgia? What is the stance of the state authorities on cryptocurrencies? How well do officials understand the nature of blockchain? Lasha Antadze, Founder at Shelf.Network and developer at e-Auction 3.0, and Vano Narimanidze, Co-Founder at Blockchain Association Georgia, provided answers to these and other questions. The experts will make presentations at Blockchain & Bitcoin Conference Georgia on June 20, and for now, let’s see what they said during the interview.
Interviewer: Blockchain & Bitcoin Conference Georgia (BCG).
Respondents: Lasha Antadze (L.А.) and Vano Narimanidze (V.N.).
BCG: According to the report of the World Bank, Georgia is ranked among leading cryptocurrency miners due to the low electricity tariff and absence of taxation. How does the country benefit from mining?
L.А.: One of the advantages is a strong demand on electricity since it develops the business of power suppliers. So, even in a free trade zone with no income tax salary is still paid.
This state of things has established Georgian presence on the international arena. Let me explain to you how. For the first time in my life, whatever the conference I attended, from Asia to America, it wasn’t necessary to tell about my native country since everybody knew Georgia due to mining.
V.N.: Yes, we are the third cryptocurrency miner in the world but it’s according to the official data that does not include all miners and private mining farms.
Though the electricity tariff is quite low in Georgia, mining stimulates the growth of the energy sector. All in all, electricity generation works well in Georgia but for the last couple of years we had to buy it abroad and import. I think mining will accelerate the building process of new hydro and renewable energy plants in Georgia. Also, mining is quite a risky business but those who do it in a smart way are able to improve their financial situation quite well.
BCG: Georgia was among the pioneers who started introducing blockchain in state registers. What are the main difficulties?
L.А.: I am skeptical about that. This is a highly complex task so a revolutionary approach towards blockchain implementation is needed.
V.N.: I think the main difficulty with our implementation of a distributed ledger is that Georgian project uses bitcoin’s blockchain where transactions fees are quite high.
Blocks have a limited size and block time is ten minutes, which is not fast enough to keep up the pace. When you submit a lot of transactions in course of current implementation of bitcoin’s blockchain, it is very easy to overload the network, which causes troubles for everyone. For example, transactions take ages to get into blocks.
Besides, fees increase dramatically. Do you remember last year when bitcoin’s blockchain was congested? I think we had our part in that because at that time our registry deployed quite a large amount of transactions. The main problem is that we are using a very congested blockchain.
BCG: How well do Georgian officials understand the way blockchain works?
L.А.: I very much doubt whether officials are competent at blockchain and other spheres, by the way.
V.N.: I don’t think many understand it well. Of course, there are some people in our government who understand how blockchain really works and what benefits it may bring.
It is generally a worldwide problem mostly, not only Georgian. Many officials think of bitcoin and cryptocurrencies only when they hear about blockchain, even though blockchain is so much more. We work to change that state of things and think our conference will play an important role in this.
BCG: There are three main claims on cryptocurrencies: tax avoidance, dirty money legalization, financing of illegal trading. How can these problems be solved within the legal framework?
L.А.: I don’t think that most of transactions for illegal actions financing or money laundering are carried out in crypto. I guess their part hardly reaches 1 or 2%. If a mechanism to regulate illegal activities with dollar and other fiat were elaborated, it would be applied for cryptocurrencies.
V.N.: I think cryptocurrencies are the future and every country that avoids it now actually goes backward. It is like the next big thing after the Internet and it is quite underpriced now. You can get a lot of investments cheaply. After some time, it will become more and more difficult to penetrate the crypto market.
It is funny now when you hear that someone tries to block or strictly regulate cryptocurrencies. If you wish to block them, you should block the whole Internet, will you? Blockchain technology is too powerful for that. When you try to limit it, you stimulate black markets, tax avoidance and so on. Plus, illegal traders, I think, still love U. S. dollar more than everything else.
I think the only way to solve those problems with cryptocurrencies is to embrace them, make them legal and give people as much useful information as possible. Those problems still happen with fiat, for example, but only giving as much information as possible is a way to avoid it.
BCG: How can you describe the attitude of Georgian authorities towards the crypto market?
L.А.: The authorities have not introduced any straightforward regulation or vision of the further actions yet. It doesn’t ban or prevent the crypto market from functioning, which favorably influences the crypto realm. Sometimes such passivity is just what is needed.
V.N.: Georgian authorities are in observing mode and generally, they’re trying to be a bit conservative, which is not a good attitude nowadays, I think. Conservative attitude can be good for huge economies like, for example, the USA or Germany but for Georgia blockchain and cryptocurrencies is the opportunity not to be missed. Even though we are one of the first countries who used the blockchain technology at state level, we are now backward regarding the regulations and attitudes, which hinders the investment.