Bitcoin miners in Abkhazia who are being blamed for the region’s energy crisis complain of missed riches as cryptocurrency’s prices soared to record highs last month.
Inal is among those whose hearts sank with the rising prices. The unemployed 30-year-old had spent his savings setting up a system to generate the cryptocurrency last summer, but rolling blackouts and a police crackdown in his native Abkhazia forced him to pull the plug early, missing out on a potential fortune.
“I am looking at bitcoin prices now and I want to cry,” said Inal, who asked not to use his real name to protect his identity, in a phone interview.
Inal is one of an estimated hundred Abkhaz who joined a cryptocurrency craze that swept the Black Sea territory last year, sparking an energy crisis that local authorities are struggling to grapple with.
The power cuts have highlighted the energy cost of cryptocurrencies at a time when global interest in virtual cash is booming and bitcoin, the original and most popular virtual currency, is gaining acceptance among mainstream investors.
Bitcoins are generated in a process called “mining,” in which a global network of computers competes to solve complex algorithms.
These computers require a vast amount of energy to run, with climate experts voicing concerns about cryptocurrencies’ potential to derail efforts to tackle global warming.
The issue of high energy consumption has recently come to the fore in Abkhazia, a lush strip of land once the playground of the Soviet elite, that broke away from Georgia in the early 1990s after the collapse of the Soviet Union.
“They really have had a sort of electricity crunch because of the amount of crypto mining that is going on,” said Maximilian Hess, a research fellow at the Foreign Policy Research Institute, a U.S. think tank.
With a population of about 240,000, Abkhazia has seen at least 625 crypto farms set up in just the past few years, according to estimates from its economy ministry.
Yet locals believe the number to be much higher, with many families running small-scale operations that are hard to track.
The government first tried to rein in the activity in 2018, but a ban failed to have much effect as importing the hardware used for crypto mining remained legal, economy minister Christina Ozgan said in a statement in September.
Abkhazia’s crypto boom, which started in 2016, is rooted in its particular geopolitical situation, according to Hess.
The territory is recognized as an independent state only by Russia, which has a military presence there, and a handful of other nations. The rest of the world still considers it part of Georgia.
This has left it largely isolated and underdeveloped, said Hess.
“Abkhazia faces substantial issues at attracting any kind of foreign investment or growing its local economy,” he told the Thomson Reuters Foundation.
As a result, cryptocurrencies, which operate outside the traditional…