China, the world leader in Bitcoin mining, may have some competition as the Kremlin enters the race, even creating its own its own cryptocurrency wallet.
Russia has a complicated history with Bitcoin. The debate to ban the cryptocurrency has swayed back and forth for the past several years, even threatening extremely harsh prison sentences, but things have recently taken a more supportive turn.
The push began in early 2016 when the Bank of Russia began evaluating the applications of blockchain technology in the financial sector. The Bank of Russia noted in a press release: “[T]he Central Bank established the Working Group on the analysis of advanced technologies and innovations in the financial market. Among the priority issues – the study of distributed ledger technologies (eg: blockchain), as well as new developments in mobile [technology], payment [industry] and other areas.”
Later in 2016, the Bank of Russia announced that it would begin testing Ethereum-based blockchain technology dubbed “Masterchain.” The prototype was used as a ‘networking tool’ with the purpose of enabling ‘prompt confirmation of data actuality.’ This test has since grown into an alliance between Russian banks similar to the Western Enterprise Ethereum Alliance which consists of heavyweights such as JPMorgan (NYSE:JPM), Intel (NASDAQ:INTC), and Microsoft (NASDAQ:MSFT).
Then, in July 2017, the push to join the global cryptocurrency ranks escalated. In a resounding endorsement for the coin’s blockchain technology, Russian President Vladimir Putin met with Vitalik Buterin, developer of Ethereum, at the St. Petersburg Economic Forum. Putin reportedly 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.”
This meeting sparked rumors that Russia is beginning to develop its very own cryptocurrency which was verified only a month later with the announcement that a Putin ally is building a $100-million Bitcoin mining operation.
Dmitry Marinichev, a trusted ally of President Vladimir Putin, has embarked on developing a large-scale mining operation through his company, Russia Miner Company, a joint venture, between Marinichev, the Party for Growth and the developers of the Waves Platform blockchain. The company intends to launch an Initial Coin Offering (ICO), accepting payment both in Bitcoin and Ethereum, in order to raise the $100-million to fund the endeavor.
The ICO will use Russian Miner Coins (RMC) and will entitle investors to 18 percent of the revenue generated from the company’s mining equipment.
In order to minimize the costs of the operation, the mining equipment will use semiconductor chips and the computers will be placed in the homes of private citizens in order to take advantage of Russia’s extremely low electricity rates due to the country’s 20 GW power capacity surplus. Marinichev noted that, with this environment, “Russia has the potential to reach up to 30 percent share in global cryptocurrency mining in the future.”
With China’s share of the global market at 60 percent, Russia has a long way to go to achieve dominance in the sector, but a lofty 30 percent share would surpass every other country on the planet, including the United States.
Russia’s blockchain ambitions don’t stop there, however. In Marichinev’s joint venture with Waves, the group hopes to create a blockchain platform which will act as a pre-ICO verification, ensuring that offerings are safe for prospective buyers to invest in.
The future of Bitcoin in Russia is being determined – regulation is still being formed and the movement is still growing. But what we’re seeing is that, even in the highest levels of government, cryptocurrencies and blockchain technology are gaining acceptance.
In a clear sign that Russia is ready to become a leader in the emerging technology, a scientific institution has even successfully tested a platform which could theoretically withstand “quantum hacking,” or a hack from a quantum computer.
The incredible advances which Russia has made on the blockchain front will assuredly position the country ahead of the pack as the race progresses. Russia’s early entry into cryptocurrencies and blockchain tech could very will give it the same advantages which benefited the West with the invention of the internet.
Featured image from PXhere