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Real Estate Registry on Blockchain: Promise Land or Wishful Thinking?

Researcher from RMIT explains why startups will fail to fulfil their promises to disrupt real estate with blockchain.

Why have blockchain pilots in real estate abated somewhat? Those projects bump up against the fundamental inconsistency of blockchain and existing state system, and it seems they cannot confessed to this.

First, there is no such thing as the use of blockchain for real estate. There are plenty of different concepts and ideas, and as you will find below, some of them are useless. And when you consider probably the most ultimate idea — i.e., a title token — you understand that none of the existing projects could offer a complex solution to address issues with inheritance, lost private keys, co-ownership, delegation of rights and a bunch of legal issues that arise from blockchain immutability. The only scenario you can find is permissioned decentralized ledger technology (DLT), which is just yet another centralized technology — or blockchain with “smart” applications on top but which are centralized in their core design. These issues remain unnoticed in blockchainization buzz. Let’s go through known projects and bust their myths.

Honduras

The first news of the use of blockchain for cadastral registry proliferated as a gospel in 2015 from Honduras with the help of Epigraph and Factom Inc. Being referred to by many enthusiasts for a long time, the project itself was never kicked off. And here we find the first fundamental constraint, though not a technological one:

Highly corrupt countries could significantly benefit from blockchain — a temper-proof, transparent, public and decentralized database; but they won’t until kleptocratic regimes run their countries.

Chromaway

Chromaway was founded in Sweden in 2014, giving hope of disrupting the old-fashioned centralized and bureaucratized real estate cadastre. In a YouTube demonstration in 2019, the team showed their centralized DLT platform, “Chromopolis” (which is not a blockchain like any other permissioned DLT platform), and revealed a lab prototype app for title deeds. The app requires government clerks and brokers to “bless” transactions between counterparties. And here is unveiled the second most significant misconception. In general, the problem of the architecture of such systems is that records have legal force only when they are stored in the closed governmental database, all peer-to-peer transactions on the blockchain between parties make no sense, as far the last word is on the side of the one who controls the central registry:

A centralized system is an antipode to uncensored distributed public technology of blockchain. Any attempts to make friends with these two, in which centralization reserves a leading role, are doomed to failure because the blockchain loses all benefits.

Without shifting from centralized to distributed architecture, any attempts of disruption turn into mimicking the existing system. In fact, nothing more happens than digitizing bureaucracy and middlemen. However, Chromaway teaches us another lesson: Over five years, the project did not succeed in introducing a working system at the state level but announces, from time to time, new phases of its development. The problem here is:

Prosperous and highly developed societies often fail to find reasons to change the existing system. What for, if it works, though imperfect?

It must make extraordinary sense for changes, especially at the scale of a whole country. And it is clear that the Swedish government has no incentive to let go of its monopoly on political power over centralized cadastral registry. To add, Chromaway, during its initial coin offering (ICO) in August 2018, wrote in its white paper that it is going to develop the DLT network and will keep centralized control over it and promised to decentralize it in the future. It was also revealing that its white paper articulated no direct plans in real estate and cadastral registry. Therefore, it leaves little hope that the real estate revolution is coming from Chromaway.

Dhana, Bitfury and others

Bitland has been in Ghana since 2014, and the project has never delivered its objectives to “register land and real property ownership and use rights” using blockchain. Propy Inc., during its ICO in 2017, stated that its far-reaching plans were to disrupt the industry by eliminating third parties with a global real estate supermarket on the blockchain driven by smart contracts. However, its supermarket, at this stage, looks like yet another real estate broker’s platform that has no relation to any land title registry. And this is very convenient, as it can always say that it had never promised disruption at this phase. The demo of the project gives some hope for the future, though it is not accessible for public online registration.

REX, founded in the United States in 2016, promised a new multiple listing system (MLS) standard for real estate brokers, ending up with the Imbrex online ad listing protocol for brokers and landlords — and, if we forget about the high-level idea to get rid of the enormous amount of middlemen in real estate, it looks like a success. 

Velox.re demonstrated in Cook County, Chicago how hashing on a blockchain could imitate a real cadastral entry but ceased its activities in this direction. Bitfury launched its centralized DLT based on the Exomun DLT framework in the Republic of Georgia and Ukraine. The project purposed to hash records of the real estate database on Exomun. Some professionals suppose that its impact at the security level of the government-owned land registry is inconspicuous. Notwithstanding, we need to give credit to Bitfury because it has never aimed to de-bureaucratize the domain and reduce middlemen.

Related: Wine, Mountains, and Mining Rigs: Georgia as a Crypto Powerhouse

How did the revolution come tumbling down?

To explain why the mentioned projects failed to revolutionize real estate (some did not even promise that, but many believed in it because they used the magic word “blockchain”), we should clarify the most important conceptual inconsistency of the blockchain and traditional legal system.

The problem is the immutability of blockchain records. One may say this is an advantage, but the current paradigm stands on the centralized hierarchical model.

The last 2,000 years since Roman law appeared, people developed lots of legal doctrines to protect property rights. All of them have been based on an imperfect nature of people’s relationships and the need to fix problems when they arise. Blockchain appeared ill-prepared to deal with the theory of law and state — and actually, nobody designed the technology with these prerequisites. Or perhaps we should change the theory to fit the blockchain? Tough question, isn’t it?

High-level ideas recently discussed in the industry and academia do not answer the main question: How exactly can blockchain technology be applied? When these scenarios are analyzed, it becomes clear that there is no single use of blockchain for real estate but an array of bold ideas.

Anyway, in general, blockchain beyond cryptocurrency can be used to: 

  • Insert arbitrary user’s data (for example, hashes).
  • Create tokens.
  • Manage tokens with smart contract.
  • Develop so-called decentralized applications (DApps).

Related: Blockchain-for-Land: What We Are Getting Wrong and How to Fix It

Hashing cadastral records

First of all, this is not about disrupting bureaucracy but about information technology security. And the use of studied pilots in Georgia and Ukraine with Bitfury is questionable. The real estate registries in both countries remained centralized and closed. If the cadastral database with title records is not open — and whatever hash value thereof is inserted in the blockchain/DLT — then it does not secure the record itself. The reason why is that the record can still be tampered with while it stays in someone’s hands. When the record is tampered with, the hash from such a fake record can also be published on the blockchain as well — and then revealed as legitimate. Moreover, in these pilots, so-called “blockchains” appeared not to be a blockchain but a centralized and closed DLT, known as Exonum.

Even if we consider here the use of a real public blockchain, we will have another problem: How do we know which record is authorized? Transactions on the blockchain are pseudonymous and uncensored — so, anyone can make any records, including fake ones. We need a layer of authentication. Someone centrally will identify and authorize state-owned blockchain addresses, from which records are published. And then, another centralized, off-chain system will track the blockchain to filter and collect a white list of correct hashes, which are considered to be made by authorized clerks. Having such a level of centralization, this approach can barely compete in terms of security with existing governmental databases.

Hashing records of deeds

Let’s say a buyer and seller came to an agreement expressed in an electronic file, its hash was published on the blockchain, and we consider it as a deed.

The first issue is the authentication of the parties: How do we know that it was Alice and Bob who hashed this record in the blockchain? We can use here something that we know as Public Key Infrastructure (PKI) with trust ID services. This means they will deal with a trusted third party that creates and manages digital identities: Certificate Authorities (CA) or Trust Service Providers (TSP) in the U.S. and European Union respectively (other counties replicate these models). For example, in the EU, this system is well-developed (see, for example, Estonian e-Residency) and allows remote authentication of users; however, this is very regulated and bureaucratized.

One may ask: What if Alice and Bob identify themselves without trusted third parties? Yes, they can deal remotely if they trust their remote identities. The problem is that the government does not trust them. No government will allow anonymous and fake IDs because of two main reasons: money laundering and terrorism financing.

But if conventional PKI is used, then why do we need blockchain at all? The parties will remotely sign the e-deed with their digital signatures, issued by CA/TSP. If you trust the cryptography of blockchain, then there is no reason not to trust PKI, which is based on the same.

Besides technological discussion, here appears a legal issue: How is it possible to acknowledge an e-deed? A town clerk (a notary, a registrar, a title company or whoever is responsible for that in a certain state) must also apply its digital signature. For many countries, such a deed would be so innovative that it would require new regulations. Therefore, when startups promise to disrupt real estate and forget to mention that they need to change the legislation, they are cheating or are just premature. 

Even though we legitimized electronic contracts, there is still the system of a state-owned database. So, you end up with the registration of this deed that is made by a town clerk (notary, title company, etc.). So where is the advantage of the blockchain? Therefore, not shallow but significant changes are required in the whole paradigm. 

Smart contracts with title tokens

While the idea is very broad, let’s shrink it to a typical, possible scenario. One party has a token that represents a land title, and another party has some cryptocurrency. 

The smart contract is designed to perform an atomic transaction — i.e., to exchange the token for an agreed amount of cryptocurrency. In this scenario, a notary is excluded (or who is meant to acknowledge the deed in any particular jurisdiction) and the deed, therefore, is not legitimate. 

The second, while titles/deeds live in the central state database this transaction has no legal meaning. This token, as per law, represents nothing, even if the parties want it to be a title. It is clear that new regulations are required to legitimize these relations.

If we assume the government recognized title tokens and such transactions, then what must happen when the landlord dies and does not leave the private key to anyone? Or, if the owner simply loses the key? What if the transaction is disputed by someone whose rights were violated? What if the private key was taken as a result of a crime? How will custody represent rights of a disabled person? Or, how can a judge split the land between divorced spouses? And this is just a small list of possible legal issues that will bump up against the immutability of records and strong cryptography, which won’t allow anyone but the owner of the private key to have access.

Should we consider all transactions always valid, no matter what happens? Then, the landlord and the successors lose their property when the key is lost, and the court ruling to reinstate someone’s title will be useless, as it cannot be enforced.

Reissue a new token? Then, what if the lost key is found or the defeated party in a lawsuit still uses its private key, actuating a transaction with the old token? We will have two tokens that represent one title. Collision with double spending of the same real estate is inevitable. Then what?

Okay, let’s allow anything to happen on the blockchain but treat all these transactions only as evidence, as a source of facts whether they are lawful or not. We will then develop a separate title/deed registry in which we will write a consummation and strike out thereof when something goes wrong.

But don’t we already have such a registry in each country, with regulations and instructions on any possible situation — what we call bureaucracy? Didn’t we want to get rid of that?

It’s clear that people do not like tedious legal procedures, as they cause high transactional costs. We see that disrupting projects should entail legislative changes and true reforms, but for that to happen, a mature concept is required. We will talk about a possible scenario in upcoming publications.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.

Oleksii Konashevych is a Ph.D. fellow in an international program funded by the EU government, Erasmus Mundus Joint International Doctoral Fellow in Law, Science and Technology. Currently, Oleksii is visiting RMIT and collaborates with the Blockchain Innovation Hub, doing his research in the field of the use of blockchain technologies for e-governance and e-democracy. Oleksii works on tokenization of real estate titles, digital IDs, public registries and e-voting on blockchain. Oleksii earned a master degree in law in 2005 and a master degree in economics in 2010. Before academic work, he practiced law in Ukraine for 10 years, holding senior positions. He participated in an initiative that worked on e-democracy reforms and became a co-author of the law on e-petitions, collaborating with the Presidential Administration of Ukraine as a manager of the e-Democracy Group.

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Blackstone Majority-Owned Indian Tech Firm Partners With Bitfury on Trade Finance Project

Indian tech firm Mphasis has partnered with blockchain tech giant Bitfury on a trade finance project.

Indian tech firm Mphasis — majority-owned by the American multinational private equity firm Blackstone Group — has partnered with blockchain tech giant Bitfury on a trade finance project, Reuters reported on May 28.

The report notes that Blackstone owns 52.3% of Mphasis, which is listed on the National Stock Exchange of India. According to Reuters, details of the Mphasis-Bitfury project are still evolving, but Mphasis’ senior vice president and global head of payments Andres Ricaurte has reportedly stated that:

“Our goal is to accelerate the disruption and transformation in the trade finance space. The exact end-goal — whether it’s a platform, a trade token, or a consortia is still to be figured out.”

The prospective digital token or platform would potentially aim to automate payments and other financial services in international trade transactions, according to an unnamed Mphasis executive.

While several projects are already ostensibly aiming to leverage new technologies to modernize aspects of global trade transactions, Ricaurte reportedly claimed that core financial services involved — including cross-border settlement and transaction financing — remain reliant on cumbersome and outmoded infrastructure.

Ricaurte claimed that the resulting inefficiencies — compromised visibility for various parties and liquidity lags — have contributed to a worldwide gap of as high as $1.5 trillion between the demand and supply of trade finance. He noted that the project with Bitfury will therefore aim beyond the basic creation of a digital currency, but more broadly seek to create:

“A digital representation of the liquidity that’s trapped inside this supply chain and leveraging that representation to make trade transactions more seamless and transparent to everyone.”

In order to develop the joint trade finance offering, Mphasis will reportedly leverage Bitfury’s open source framework for building blockchain applications, Exonum.

In a statement, Bitfury CEO Valery Vavilov underscored that the joint venture will aim to combat fragmentation in existing financial services via the creation of interoperable systems.

As reported, Bitfury has recently been valued at $1 billion and last month released a dedicated bitcoin mining fund for institutional investors in partnership with Swiss investment firm Final Frontier, in which it holds a minority stake.

Earlier this month, a senior executive at Singapore’s Oversea-Chinese Banking Corp Ltd. — one of Asia’s biggest bankssaid the $9 trillion trade finance industry urgently needs digital innovation in order to mitigate existing fraud risks.

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Bitfury Partners With Kazakhstan-Based Financial Hub to Cooperate on Blockchain Projects

Bitfury teamed up with the Astana International Financial Centre to collaborate on blockchain development in the region.

Blockchain tech giant Bitfury partnered with major Kazakhstan-based financial hub to apply the technology across multiple industries, local government-backed newspaper The Astana Times reports on May 21.

Headquartered in Nur-Sultan, the newly renamed capital of Kazakhstan, the Astana International Financial Centre (AIFC) will apply Bitfury’s blockchain expertise in creating projects and promoting new startups on a global scale.

In turn, Bitfury plans to launch data centers in Kazakhstan to gain exposure and cooperate with the Nur-Sultan city administration, as well as support the development and promotion of distributed ledger technology (DLT) in the region. The blockchain firm is also planning to open education and training courses on the platform of the AIFC Bureau for Continuing Professional Development, the report notes.

Timur Bairov, Head of Kazakhstan for the Bitfury Group, said that Bitfury has already “shown its strong commitment to education and equal access to technology” via blockchain in Georgia and Ukraine.

Founded in 2015, the AIFC is reportedly positioned as a financial hub for the countries of Central Asia, the Caucasus, Eurasian Economic Union, Middle East, Western China, Mongolia and Europe.

In April, Bitfury partnered with a Swiss investment firm to set up a bitcoin mining fund for institutional investors, receiving regulatory approval for the fund.

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Bitfury Institutional Bitcoin Mining Fund Gains EU Regulator Approval

The blockchain software giant will provide hardware and other support to the fund, which is administered by Swiss-based Final Frontier.

Blockchain tech giant Bitfury has partnered with a Swiss investment firm to release a dedicated bitcoin mining fund for institutional investors, executives confirmed on Twitter on April 24.

Bitfury, which develops various blockchain-related software along with mining services, confirmed that Final Frontier, in which it holds a minority stake, had gained regulatory approval for the fund from neighboring Liechtenstein.

Focusing on institutions, the fund will give major investors access to the world of bitcoin mining, with Bitfury describing its creation as beneficial for the emerging sector.

Bitfury will provide the hardware for the project, which will also leverage the company’s various mining centers to source power and deliver favorable mining costs.

“With the bitcoin (BTC) price down significantly from its all-time high, yet institutional interest growing every day, now may be an opportune time to consider investing in bitcoin mining,” Imraan Moola, co-founder of Final Frontier, additionally told Reuters.

The move comes at a productive time for Bitfury, which earlier this month made Forbes’ list of the top 50 companies worth $1 billion or more using blockchain worldwide.

As Cointelegraph reported, the mining sector has experienced a troublesome six months, last November’s price dip to $3,100 sparking a chain of warnings from major market players.

In China in particular, where authorities now plan to crack down on mining, participants said that lower bitcoin prices were forcing them to abandon their operations independently.

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New Bitfury Joint Project to Manage Medical Data Permissions With Blockchain Tech

Blockchain tech firm Bitfury and Longenesis have jointly launched production of a blockchain-based consent management solution for doctors and patients.

The Bitfury Group and blockchain-powered medical data marketplace Longenesis have jointly launched production of a blockchain-based consent management system for the healthcare industry. The development was announced in a press release shared with Cointelegraph on April 4.

Per the release, the new product addresses issues with the management of user consent for ongoing and upcoming research endeavors, compliance with the General Data Protection Regulation (GDPR) and Health Insurance Portability and Accountability Act (HIPAA), as well as streamlining data collection for medical research.

Once collected, all data and updates to user consent are reportedly recorded on the ExonumTM blockchain with timestamping for future auditing. The solution can purportedly be used both as a full data-management system and as an add-on to existing digital systems for storing user consent. Alex Zhavoronkov, CEO of Insilico Medicine, Inc., said:

“While the regulations vary from country to country, the research organizations should strive to deploy content management systems that protect the data owners far better than any regulation. At the same time, the consent procedure should be pain-free, rapid, cost-effective and universal to ensure that the patients are fully-protected and educated.”

In February, Bitfury partnered with radiology blockchain marketplace Medical Diagnostic Web (MDW) to create a blockchain-based medical imaging ecosystem. Within the collaboration, Bitfury, MDW and Longenesis aim to develop a platform for maintaining, sharing and securing medical imaging and diagnostics information such as X-rays and CT scans.

Blockchain technology has been actively deployed by organizations around the world aiming to transform electronic health information. In March, South Korean Ministry of Science and ICT and the Seoul Medical Center jointly developed the “Smart Hospital” project geared to  improve data accuracy and reduce processing timing for the aforementioned hospital.

Academics from the University of California, San Francisco, also proposed a method of sharing medical data using a blockchain-based system. The system aims to improve the traceability and immutability of collected clinical data, and make it more trustworthy. In addition, the system aims to advance methods for reporting adverse events during research and improve medical record management.

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Report: Crypto Miner Hut 8 Lays Off More Staff

Hut 8 crypto mining, which runs a joint venture in Alberta with Bitfury, has reportedly laid off more staff.

Canadian Bitcoin (BTC) mining  firm Hut 8 has reportedly laid off employees at its facilities in the province of Alberta, the Canadian Broadcasting Corporation (CBC) reports April 4.

Hut 8’s crypto mining facilities in Drumheller and Medicine Hat are part of a joint venture with European crypto mining hardware firm Bitfury.  

A former employee at the Drumheller facility told the CBC that he was laid off along with two dozen colleagues in January. He reportedly stated that the company reduced its staff by around 25% globally at the time, while teams in Alberta have faced even bigger layoffs.

The cuts in staff reportedly come as a result of the 2018 bear market and increased electricity costs in the region. However, the staff reductions have purportedly exceeded expectations, with the layoffs reportedly accounting for half of the data center operations crews, the CBC says.

Founded in 2017, Toronto-based Hut 8 has reportedly mined 7,300 Bitcoin (BTC) to date.

Bitfury has not confirmed layoffs to CBC, declining to comment on the number of employees laid off this week, or in January. However, a Bitfury spokesperson stated that the layoffs were part of an effort to streamline operations.

Hut 8 reported a record revenue in Q3 2018, stating that its revenue was as high as $13.5 million, and $27.7 million for the nine months ending on Sep. 30, 2018. However, it also experienced a net operating loss of $8.3 million.

Recently, biotech company turned mining firm Riot Blockchain reported a 2018 net loss of about $58 million in its financial report.

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Wine, Mountains, and Mining Rigs: Georgia as a Crypto Powerhouse

If crypto mining is similar to oil extraction, should nations worry about the resource curse?

The former Soviet republic of Georgia, which occupies picturesque mountain valleys and rugged ridges of the Southern Caucasus, has roughly the same population as the state of Connecticut. It is renowned as the birthplace of Joseph Stalin, as well as for being one of the oldest wine regions in the world, its rich and eclectic cuisine, and, more recently, for hosting the world’s third-largest cryptocurrency mining operation.

Additionally, an estimated 5% of the nation’s households are engaged in mining crypto or invested in it. Back in 2016, the Georgian government was the first to create an operational blockchain-powered system for property rights registration, which by mid-2018 had hosted more than 1.3 million electronic documents. State officials are now looking to move all government registries to distributed ledgers.

Sounds like crypto-buff’s dream, doesn’t it? For a small nation, though, the place in the front row of fintech pioneers comes at a cost. A single entity, the US-based blockchain software and hardware provider Bitfury, is responsible for much of Georgia’s current crypto momentum. Cheap electricity and lax regulation were the selling points that attracted the mining giant to the Alazani valley; being able to negotiate tax exemptions and secure favorable loan terms made it stick around. Critics surmise that it took Bitfury striking a backroom deal with some of the most powerful people in the country to win these privileges, and now the arrangement benefits a very narrow circle of stakeholders while threatening the nation’s energy security.

The warm welcome

Bitfury Group was founded in 2011 by a Latvian entrepreneur Valery Vavilov, whose bio on the company’s website mentions his first-hand experience with the “challenges resulting from the collapse of the Soviet Union.” Although the company is incorporated in San Francisco, the natives of the post-Soviet space are heavily represented among its leadership. Apparently, Bitfury’s С-suite were quite familiar with both challenges and opportunities that the region presents, as well as with ins and outs of doing business in the area.

Vavilov first arrived in Georgia to talk business in 2013; in July 2014, Bitfury’s first 20 megawatt data center emerged in the eastern Georgian city of Gori. In December of the following year, a major expansion nearly tripled the company’s mining capacity in the country, as Bitfury deployed its 16 nm ASIC chips at a new facility in the area called Gldani, within the capital Tbilisi city limits. This outpost became the first resident of the newly developed Free Industrial Zone, which was designed to attract technology companies by perks such as an exemption from the 18% VAT. The company purchased 18 hectares of land for a symbolic price of 1 lari, which amounts to a fraction of 1 USD. The new data center’s featured a new proprietary cooling technology: its computers were submerged in tanks of non-conductive fluid while racing to seal the block.

As Bitfury arrived in 2014, the Georgian Co-Investment Fund, linked to the country’s wealthiest person and former Prime Minister Bidzina Ivanishvili, provided the firm with a $10 million installation allowance. Although both Bitfury and Ivanishvili’s representatives have repeatedly stated that the loan has been repaid even before the Gldani facility opened, the rumors of the billionaire remaining one of the main beneficiaries of the project never subsided. At any rate, the two entities still maintain at least an interlocking directorate connection, as Bitfury’s board member George Kikvadze holds a senior office with the Co-Investment fund.

The relationship between the government and the mining behemoth briskly progressed, and in April 2016 Valery Vavilov and the Chairman of the National Agency of Public Registry made public their plan to create a blockchain-powered land registry system. The following year, Georgia made history in becoming the first nation to implement distributed ledger technology for securing and validating government records.

In February 2018, Bitfury announced that it was selling the Gldani data center to Chong Sing Holdings, a Hong-Kong based fintech company, citing the need to continue its “successful expansion in the Asian market of both hardware and software solutions.” However, in just a few months the facility went back under the original proprietor’s control: amid plunging prices and increasing regulatory pressures in China, Chong Sing found itself rushing to hedge the risks and cut down exposure to crypto assets. Bitfury was able to get the Gldani facility back at a discount. Despite the lingering bear market, the company still reports profit and remains bullish on Bitcoin in the long run.

The Bitcoin dream

Whether it was due to Bitfury raising the profile of the mining enterprise or people being able to figure it out regardless, the ordinary Georgians have had their fair share of the crypto craze. Hundreds of thousands of rigs joined the race before the market went steeply downhill, driving the share of mining in Georgia’s electricity bill to a staggering range between 10 and 15 percent. Despite the government’s general blockchain-friendly, low-regulation stance, toward the end of 2017 financial authorities grew concerned with the scale of the gold rush and had to remind Georgians that Bitcoin was still not a legal tender, and recommend to exercise caution when staking their livelihood on crypto.

The nation’s Bitcoin exuberance at the peak of the Great Bull Run was understandable: it seemed that the combination of the state’s openness to crypto and cheap electricity available across the board was going to bring about prosperity. The industrious folk rushed to the remote highland areas where state-subsidized electricity was available for free. A political party emerged that proclaimed its ambition to push ahead with the idea of creating a national cryptocurrency, which would allow every citizen to benefit from the country’s pool of unused resources.

Yet, with the crypto prices in free-fall, the future of rank-and-file miners looks a lot bleaker. Where Bitfury can still reap the fruits of massive economies of scale, cutting-edge technology, and tax exemptions, Bitcoin hunters with rigs in their garages are increasingly likely to find themselves unable to turn any profit. And as the crypto dream gives way to tough reality, the question looms large again: Is the model of blockchain development that Georgian leadership is pursuing sustainable in the long run?

Decentralizing the field

Georgia is small and not particularly wealthy, so offering lavish concessions to a major player in the industry that has a big promise is a defensible strategy. The choice here is not between welcoming one large firm and hosting a vibrant diverse fintech sector – it is more likely between the former and not being on the blockchain map at all. This could be “high-tech gambling,” as Gocha Tutberidze, a professor at the European University in Tbilisi, told NPR, yet this could be the only possible entry point.

Strategically, mining might not be the most rewarding of the crypto-related industries to host. This business is built on extracting resources without necessarily building lasting infrastructure, relationships, or technology that will benefit the territory when all is said and done. Energy consumption is a serious consideration, too: while electricity supply and demand must be calculated in plenty of time, crypto prices’ volatility introduces a lot of uncertainty on the demand side.

In late December 2018, Abkhazia, a contested state that UN recognizes as part of Georgia but which is de-facto independent from the government in Tbilisi, instituted a blanket ban on cryptocurrency mining. The move was motivated by the officials’ fear of possible electricity shortages if temperatures fall too low.

As Hans Timmer, World Bank Chief Economist for Europe and Central Asia, pointed out in an interview to Forbes Georgia, creating a level playing field for all fintech players will eventually require a more structured regulatory framework. This is a necessary condition for the next step on the path of blockchain leadership that the country aspires to take. It is now incumbent upon the nation’s policymakers and industry leaders to make sure that Georgia grows from being a mining hub to a dynamic center of fintech innovation, where a host of smaller firms compete do deliver consumer-oriented technologies and solutions.

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Bitfury Brings Lightning Payments to US Payment Gateway HadePay

HadePay now features Bitfury’s Lightning Peach API, allowing merchants to accept Lightning Network transactions.

Bitcoin (BTC) mining and development company Bitfury has entered into a partnership with United States payments processor startup HadePay to allow its merchants to accept Lightning Network (LN) transactions. The news was announced in a blog post from Bitfury’s on March 14.

HadePay implemented Bitfury’s Lightning Peach API to facilitate LN payments, which are significantly faster and cheaper than conventional Bitcoin transactions.

The startup worked with Bitfury’s Lightning Peach team, a dedicated spin-off group of engineers focused on Lightning Network promotion.

As a payments gateway, HadePay already lets clients accept crypto and fiat currencies as well as payments via various services, such as PayPal and Square.

“HadePay’s wide network will now be able to accept bitcoin knowing that the transaction will go through almost immediately,” Lightning Peach head Pavel Prikhodko commented in the blog post, adding:

“The Lightning Network is an essential tool for efficient cryptocurrency payments, and we’re thrilled to be bringing it that much closer to worldwide adoption.”

The move marks the latest push for the LN courtesy of Bitfury, the company having brought the same feature to its first exchange partner, Poland’s BTCBIT, in January.

As Cointelegraph reported, the technology is seeing heightened publicity in 2019, mostly due to the ongoing Lightning Torch transaction relay experiment.  

Passed between network participants, the Torch has seen ownership from figures including Twitter CEO Jack Dorsey, who subsequently pledged to implement LN payments on both Twitter and payments platform Square.