Since long before anyone can remember, the big, fertile slopes of the Alazani Valley in eastern Georgia have been planted with grape vines. It's the heartland of wine-making in the country that invented it 8,000 years ago. But in recent months, the valley has been going through a new kind of ferment, because of bitcoin.
"You see that building there with the power line outside," says Bezhani Buzhaidze, pointing to an abandoned-looking, cinder block storehouse in his hometown of Telavi, the hub of Georgian wine country. "That's being turned into a data center for mining cryptocurrencies."
It's another sign of how this tiny former Soviet republic of fewer than 4 million people has become a virtual printing press for this new money you can't see.
Cryptocurrency mining is the digital equivalent of minting real money, except that anyone with the right hardware and software can do it, by taking part in what amounts to a giant virtual competition. Think of it like a lottery, where computers linked across the Internet compete to solve complex mathematical puzzles, with the number of players constantly rising. The owner of the computer that finds the right solution is rewarded with a "block" of bitcoin or other cryptocurrency, which is then registered and verified on a decentralized database system known as the blockchain.
In practice, it involves a kind of constant digital bombardment to find these solutions, 24 hours a day, consuming huge amounts of electricity. And thanks to its cheap hydropower and low regulation, Georgia is now ranked second in the world for cryptocurrency mining — behind only China.
A single U.S.-based technology company called Bitfury has been accounting for much of this mining activity, from a vast data center filled with computer servers which it opened on the outskirts of the capital Tbilisi. It has generated plenty of controversy too over claims that it received overly generous terms for its electricity bills. But scores of smaller data centers have now sprouted up, with many more people mining from home with processors bought online from China.
One Georgian political party has even started raising funds by mining cryptocurrency via the computers of willing supporters. And because electricity has traditionally been more heavily subsidized in the Alazani Valley, wine country has been seeing a kind of digital gold rush.
Hoodie-wearing Buzhaidze is one of the growing army of home prospectors. He signed up last summer, as he watched the price of bitcoin surge, borrowing several thousand dollars from his father to buy three graphic cards, the backbone of any home mining operation. Ever since, they have been churning away 24 hours a day in the family living room, a constant low hiss emitting from their cooling fans.
"See, here, I've made about $14 so far today," Buzhaidze says, scrolling through brightly colored graphs and figures on an app on his smartphone. Late last year, he was making an average of $800 a month mining a currency called Zcash, with the extra electricity load costing about $80.
His earnings are down now from the highs of last year, but it is still a healthy supplement to his monthly salary working at an online marketing company in Telavi.
Part of the attraction, Buzhaidze admits, is "easy money." Four of his friends also have home-mining rigs. "Everyone is doing it," he says smiling. But he adds he is also attracted by the libertarian promise of cryptocurrencies. "We won't need banks any more," he says. "It will be good for society."
That is the question. Is this crypto boom going to help or hinder Georgia, a country still struggling with widespread poverty?
Some see an opportunity for Georgia to vault ahead, by embracing the technology and libertarian philosophy underpinning cryptocurrencies. But skeptics fear the country has become an outsourcing center for the global crypto craze, creating few jobs and no lasting gain if it all comes crashing down.
The National Bank of Georgia, the equivalent of the Federal Reserve, has issued a warning, urging people to "exercise caution" about investing in virtual currencies.
"This is high-tech gambling," says professor Gocha Tutberidze, a former regulatory official with the bank, who now teaches at the European University in Tbilisi. "The profits just go offshore," he says, to big players like Bitfury.
It certainly looks that way on Bitfury's website, which has videos showing executives enjoying ritzy gatherings on the private tropical island of British billionaire Richard Branson. The company reportedly earned over $90 million in revenue last year, though how much of that was profit is not public. It has positioned itself as a one-stop shop for all aspects of the business, making its own mining chips and software, and consulting other organizations that want to set up data centers or use blockchain technology. While it has offices in San Francisco and Washington D.C., Bitfury is registered in the Cayman Islands and releases only minimal financial information.
It has an outsize presence in Georgia. According to Bitfury's own figures, it was using around 28 million kilowatt-hours of electricity per month for its mining operations here, equal to the average consumption of 120,000 Georgian households, or 10 percent of the population. But it pays significantly less per unit, which has fueled charges that Georgia is getting ripped off.
Opposition politicians have claimed that the country's richest man, former Prime Minister Bidzina Ivanishvili, is a hidden beneficiary. An investment fund linked with the billionaire tycoon loaned money to Bitfury when it first arrived. But the company's lawyer in Georgia, Eprem Urumushavili, says the loan was repaid, and denies any financial ties remain. However, the vice chairman of Bitfury's board, George Kikvadze, also has a senior role on Ivanishvili's fund.
Perhaps hoping to sidestep all this controversy, Bitfury recently announced it had sold its main data center to a Chinese concern. But its logo is still emblazoned on the building. And it remains the landlord, according to Urumashvili, as the company runs the surrounding tax-free zone where the data center operates.
Bitfury has had unfair press, its lawyer says, insisting that it is looking far beyond mining bitcoin in Georgia. Last year, it helped the government become the world's first to start using a blockchain-based database to secure public records — with the company providing server space and technical expertise.
As with cryptocurrencies, records encrypted on a blockchain are distributed across countless computers, with no single entity having control, making the system both more resilient and harder to tamper with. It began with a property registry. Next will come marriage certificates and other personal records.
Bitfury has also been talking to the authorities in nearby Ukraine about using blockchain technology to run future elections there. Advocates say this will make it much harder to hack the voting process, in light of allegations that Russia tried to do just that in previous Ukrainian polls, even before accusations of Russian interference in the 2016 U.S. election.
One small, ultra-libertarian Georgian opposition party has more radical ideas. If it ever gains power, the party Girchi — which translates as "pinecone" — wants to issue a national Georgian cryptocurrency allowing citizens to buy unused state assets, including large areas of land. "We want to privatize it all," says the party leader, Zurab Japaridze. Every Georgian citizen, he adds, would get an allowance of what they are calling, no surprise, "pinecoin."
He sees longer-term political benefits too, helping the party build a new constituency of libertarian-minded supporters.
Japaridze says they have had discussions with an outside technology company he won't name about the mechanics of creating a pinecoin cryptocurrency. He envisions a day when there will be no central banks, and property deeds worldwide will be stored on a giant blockchain database with no government or other entity having control. That, he claims, will both give owners greater protection from attempts to disenfranchise them, as well as boost overall transparency: "I should be able to look up who owns a piece of land in Bogotá, Colombia," he says.
Girchi believes it is the first party to raise funds via cryptocurrency mining. When supporters log on to its website, they are given the choice of allowing their computer processors to be used to mine Monero, a newer virtual coin being marketed for its extreme anonymity. One of Japaridze's team came up with the idea. And when he attended a recent global conference of like-minded political groups, he says delegates there told him it was the first time any party had tried to raise funds this way. It has only raised a few hundred dollars so far, he says, but "it has also helped boost our reputation for innovation with younger voters."
Such ideas are "just the beginning," says Luka Kobalia, co-founder of a Tbilisi-based company called Blockmentor, which provides training for businesses seeking to use blockchain technology in their operations. Everything about the way the economy functions is going to change, he says.
Facebook groups now regularly advertise conferences and gatherings to share ideas, addressed by people who call themselves "blockchain evangelists." Recent events have been standing room only, with people actually listening to the speakers and not looking at their phones.
Georgia's finance sector has been sitting on the fence over cryptocurrencies, but some institutions are already invested. The country's Liberty Bank now offers a means of buying and selling the best-known cryptocurrencies via its eMoney service. But it is still a long way from the point where this virtual money replaces so-called fiat currencies like the U.S. dollar, or Georgia's lari.
Like the original Klondike, Georgia's digital gold rush has attracted some colorful characters hoping to make their fortune.
Take Andrew Thornhill, an energetic financial entrepreneur from Chicago and founder of a cryptocurrency startup called Spotcoin. He first came to Georgia a decade ago to provide Internet-banking advice. In 2011, he was briefly imprisoned for fraud, but he says his conviction does not restrict him from running a financial business either there or in Georgia. "It's an unfortunate episode in my past, but I'm not trying to hide it," Thornhill told NPR, adding that his main backers and colleagues are fully aware of what happened.
Now Spotcoin is issuing its own cryptocurrency and setting up an online exchange to make it easier to buy and sell other virtual currencies. "There is nothing like this in the world yet," he claims.
Concerns that cryptocurrencies are being used as a money-laundering vehicle have been overdone, Thornhill says when we meet at Spotcoin's Tbilisi headquarters. "Criminals are using dollars and euros every day, but we don't blame the currencies," he says. And blockchain technology has the potential to make financial transactions far more secure, he maintains. But the world's central banks are right to proceed cautiously, Thornhill adds: "Everyone wants some rules. I'm a digital revolutionary, not a digital anarchist."
Bit of a bubble?
While some people outside Georgia may have become multimillionaires thanks to the bitcoins processed inside the huge Tbilisi data center, just down the road is Gldani, one of the city's poorest suburbs. The main street is lined with pawn shops and discount stores. Unemployment is high and many live on far less than the national average wage of $400 a month. It's a similar story in many rural areas.
Against this economic backdrop, according to professor Tutberidze, it's not surprising so many Georgians have dived into the cryptocurrency craze, hoping for quick wealth. But he warns a "mass psychology" has developed, with people buying in as prices rise but then panicking and selling again as they fall. He sees it as one of several alarm bells that this could become a dangerous bubble for Georgia.
Many people are spending savings or taking out loans to buy their own mining setups. Such is the demand, a secondary online market has sprung up for mining cards. But it's not hard to find stories of people who have overreached and overpaid, with little chance of ever recouping their investment.
Meanwhile, shadowy lenders have been putting ads on Georgian Faceboook pages offering $10,000 to buy bitcoin or mining equipment — with interest rates starting at 18 percent.
Kobalia, the training company co-founder, acknowledges there are dangers. "Too many people think you just plug in and make money," he says.
Tutberidze has tried to warn Georgians off it. "Friends keep coming to me, asking what I think about investing in bitcoin or other currencies," the professor says. "They sound disappointed when I tell them, 'Don't.' "
But the risks are part of the attraction of having left the Soviet planned economy behind, according to Bitfury's lawyer Urumashvili. "This is a free country now," he says.
Back in Telavi, Buzhaidze says even though his profits are down, he is sticking with it. "I don't 100 percent understand how it works," he says. "But I think it's the future."
Andrew North (@NorthAndrew) is a journalist based in Tbilisi, Georgia, and a former BBC correspondent in the Middle East and South Asia.