A cellar underneath a Soviet apartment block served as an unlikely head office for a thriving cryptocurrency business, as Georgia underwent a virtual gold rush - but now it's gone bust
By Umberto Bacchi
TBILISI, March 26 (Thomson Reuters Foundation) - After years spent farming money in his uncle's basement in Tbilisi, Georgian tech entrepreneur Shota Siradze turned over the dingy space to a more traditional crop: tomatoes.
Until November, the dark cellar underneath his family's Soviet apartment block had served as an unlikely head office to Siradze's thriving cryptocurrency business.
The cellar was one of many moribund spaces - garages, farms and warehouses - that had taken on a new life as Georgia fell in love with bitcoin and triggered a virtual gold rush.
Bitcoin began circulating in 2009 as an electronic currency operating outside the traditional banking system.
It is created as payoff for solving a run of complex sums that are used to verify transactions on blockchain - the system underpinning the currency - and is stored online.
Bitcoin's value has ranged from a fraction of a dollar to nearly $20,000 in its short life, spawning countless copycat currencies and many millionaires.
But as the virtual coins slumped to a current low of about $4,000, Siradze's operation became unprofitable, forcing the 29-year-old and his business partner to reconsider their options.
"As prices went down, we started thinking about alternatives and came up with this," said Siradze, pointing at two rows of tomatoes ripening on the vine under artificial light inside a room heated by a cryptocurrency mining computer.
A few tomatoes will not a fortune make, but it keeps the space occupied and machines busy earning a bit of spare change.
Georgia, a former Soviet republic of 4 million people, became a global cryptocurrency powerhouse in the past five years as cheap energy, tax breaks and business-friendly regulations spurred investment, according to the World Bank.
Global tech firm Bitfury, a world leader in blockchain, set up shop in Georgia in 2014. In its wake, as the value of cryptocurrencies soared, a crypto craze ignited locals.
Thousands began mining: the process of producing bitcoins by solving maths problems with high-powered computers. Bitcoin cash machines appeared in Tbilisi as cryptocurrency operations took root, injecting life in often abandoned buildings.
Last year, the World Bank estimated about 5 percent of Georgian families were involved in the business, which sucked up almost 15 percent of the country's energy demand, making it the world's third largest producer of cryptocurrencies.
The slump in bitcoin's value, however, meant revenue from mining no longer even covered the energy costs, forcing many to halt operations, said Vano Narimanidze, a co-founder of Association Blockchain Georgia networking group.
About 80 percent of all mining ventures in Georgia turned off the lights, said Narimanidze, and many rooms that had buzzed with computer fans fell still once more.
"People sold their houses, their cars, to buy (currency) miners and some of them were lucky enough to get back the money they put in," said Siradze. "But most of them lost out."
Only big businesses and those operating in tax-free zones or areas where electricity is cheap are still running, he added.
END OF THE PARTY
Siradze and his partner Irakli Pruidze had to pull the plug.
The two former IT workers owned a few processors of their own and ran a consultancy helping others to set up mining farms in exchange for a share of their profits.
One farm occupied the top floor of a disused warehouse inside a historic brandy factory in Tbilisi.
It folded in November.
Most machines were sold, the rest lie idle, collecting dust alongside a Stalin bust and a few Soviet-era posters.
A few kilometres away, another 1,000 miners - a group of processing units - lie unused inside a disbanded electronics factory that had briefly buzzed as a data centre.
"This was an old useless factory of spare parts that stopped working after the fall of the Soviet Union. We gave it a new function but unfortunately not for a long time," said cryptocurrency businessman Lasha Khanishvili.
While some entrepreneurs have simply switched off their machines hoping value might bounce back, others have found new uses for their machines and spaces.
"You can just wait - or do something else while waiting," said Siradze.
Narimanidze, of the Association Blockchain Georgia, sold three miners that had each earned him about $40 a day in 2018, and kept three more in his family's rural home.
"They keep the house warm in winter," he said.
Excess heat generated by computer servers has long been a problem for cryptocurrency miners worldwide, with media reports citing a host of innovative uses for all that hot air, be it drying strawberries or powering radiators.
Siradze and 30-year-old Pruidze opted for tomatoes.
Using LED lights and hydroponic technology, which replaces soil with water, they set up a mini farm in their basement office, growing 10 plants that have produced about 6 kilos of since autumn, only worth about $30 at retail price.
"We want to go bigger," said Siradze, who hopes to expand his basement allotment into the rooftops and join a growing global trend for urban farming.
Other green-thumbed miners have launched similar efforts in Canada and the Czech Republic, according to media reports, and Siradze voiced some of the same entrepreneurial excitement that once powered his beloved bitcoin to highs.
"You can heat up 100 square meters with 10 miners ... if you sustain them with solar power or wind power you'll get free coins, free heat and free tomatoes," he said.
"What else do you need?"
(Reporting by Umberto Bacchi @UmbertoBacchi, Editing by Lyndsay Griffiths. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers humanitarian news, women's and LGBT+ rights, human trafficking, property rights, and climate change. Visit http://news.trust.org)
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