Mining Cryptos? Russia's Cheap Energy, Cold, and Brains Are Big Advantages

Our contributor Tom Luongo had a very interesting article up yesterday explaining why Russia is embracing crypto-currencies by building and institutionalizing crypto infrastructure - as a defensive move against US sanctions, and to make Russia a more hospitable country to international capital.

A friend called me from Tomsk, which is a university town in Siberia, a couple of weeks ago to explain that the latest hot investment there is mining Bitcoin. Apparently small businesses are making 10% returns per month, taking advantage of cheap energy, computer skills, and a large supply of PhDs who can calculate the risks.

Now we stumble across this at Capitalistexploits.at, explaining that the cold weather helps too.  We grabbed a long quote below the video from CE because it has a lot of insight into why Russia is interested in cryptos, including the fact that people in Putin's inner circle are believers.

And here is the founder of Gab, the free speech alternative to Twitter, railing today against silicon valley censorship, after Google kicked Gab off their Play store, and explaining that blockchain technologies are going to destroy big tech companies' ability to censor or control anybody.

Breaking: Google removes Gab's Android app from the Google Play Store for "hate speech." https://t.co/vdoij2LzDP

— Gab (@getongab)

August 17, 2017

Russia's armies of computer nerds, also known as hackers, might just take down the deep state afterall.

So along comes Bitcoin, and governments (not just the Ruskies) initially banned it.

The Problem with Bitcoin

It’s that nobody actually asked for permission. Permission wasn’t granted but then it was never needed. A protocol doesn’t give an “isht” about any central authority and can’t be argued with. That’d be like arguing with soil.

When Sophia in Moscow wanted to use Bitcoin, she did. And when Yoshiko in Tokyo wanted to, she did. A government that said no-no, bad, dangerous, scary, only to have the kids go ahead and play in the traffic anyway, looked awfully like a eunuch – impotent.

The about turn notably from both Japan and Russia isn’t because the paper pushers suddenly took a swig from the innovation and risk bottle but because they’re largely powerless to stop it.

Providing Authority After the Fact

Imagine your snotty little kid Johnny, rather than asking you for something, simply going ahead and taking it.

Imagine further that there was absolutely nothing you could do to stop him. Would it not, at least ostensibly, be far easier to turn around and just say, “Oh no, it’s OK. Johnny Snotnose has my blessing.”

After all, suggesting it’s not sanctioned would reveal a weakness, especially if you couldn’t bring out the cane for Johnny.

Weakness, as mentioned last week, is anathema to leaders who rule with fear.

And so it is that last month, at the St. Petersburg Economic Forum, Vlad met with Vitalik Buterin, developer of Ethereum, where reportedly the Russian President viewed the technology as a “promising tool to assist Russia in diversifying its economy beyond oil and gas”.According to a statement on the Kremlin’s website, Putin said:

“The digital economy isn’t a separate industry, it’s essentially the foundation for creating brand new business models.”

Now, before you sing with the choir of libertarians thinking Vlad just joined the ranks, just remember that along with all bureaucrats everywhere they will want their slice of the pie – a topic I discussed just the other day.

Anyway…

Far from banning Bitcoin and crypto currencies, Russia is now, via a politically connected (hey, this is Russia) oligarch, raising US$100m to mine crypto currencies.

Here’s a question for you: What does Russia have a lot of?

Vodka? Yes. Brides online? Yes. But get your head out of the gutter, what else?

Energy, very cheap energy.

Mining cryptos requires cheap energy, something Russia has a helluva lot of.CLICK TO TWEET

Sure, there are other countries out there with cheap energy such as Saudi Arabia, but the problem with the Middle East… actually there are a lot of problems with the Middle East, but just one of them is that it’s bloody hot. This matters when you’re running servers, which give of more heat than one of their suicide bombers.

This makes mining farms in hot places an economically tough call. Russia, on the other hand, has both cheap bountiful energy as well as sub-zero temperatures. Perfect for crypto mining. Something you can do while swilling vodka and searching for a bride.

There is more…

Russia’s central depository is building its own crypto currency wallet:

“Russia’s National Settlement Depository (NSD), the central depository for Moscow Exchange, the largest exchange group in Russia, is developing a blockchain platform to provide deposit and settlement services for digital assets and cryptocurrencies.”

These are significant events because they signify that crypto currencies are not only now being taken seriously by business but increasingly by governments.

Enter Geopolitical Tensions

Washington being brilliant just sanctioned Russia and managed to piss of both Vlad and Angela in one fell swoop.

This after accusing Xi of being a naughty boy and now pressuring him to “do something” about young Kim. This is the sort of fragmentation I promised you last year was the future with the incoming “strong men”, and with fragmentation comes a deeper desire to de-risk one’s position.

Tell me, if you were Vlad or Xi sitting on a pile of Benjamins, would you feel more or less comfortable?

Yeah, that’s what I though, too.

Support Russia Insider - Go Ad-Free!

Wiley buggers, those Russkies.