THE NEW GEOPOLITICS OF CRYPTO
Recently the RBI, Central Bank of India announced plans for a pilot to introduce crypto-currency for retail and wholesale transactions in India.[1] This announcement follows the much-publicized move of China to also introduce a digital currency. Meanwhile, Venezuela went so far as to replace its national currency, the Bolivar, with Bitcoin. It is the first sovereign government to go whole hog to cryptocurrencies.
While these may seem like headlines for the tech-savvy and the financial sector wonks, we want to highlight the huge leverage that these developments may have of the geopolitics of the world in this decades itself.
Here is some historical background to lay out the context: The Dutch East India Company was established in 1602 C.E. two years after British East India Company was established (in 1600 C.E. by a royal charter). These two entities together, in a matter of some decades were in a position to establish their dominance in trade. However, technological breakthrough resulting in the industrial revolution gave wings to these and other similar entities to completely redraw the geopolitical map of the world and their impact was directly felt right up to the 1940s. On the other side of the world, the Ford Motor Company was established in 1903, leading to the oil centric geo-politics right up to the US war on Iraq in the mid 1990s. While, the world's first systematic petroleum refinery was built in Ploiești, Romania in 1856 using the abundant oil available in Romania.
In North America, the first oil well was drilled in 1858 by James Miller Williams in Oil Springs, Ontario, Canada. In the United States, the petroleum industry began in 1859 when Edwin Drake found oil near Titusville, Pennsylvania. The industry grew slowly in the 1800s, primarily producing kerosene for oil lamps. Natyral resource was the same but in the early twentieth century, the introduction of the internal combustion engine and its use in automobiles created a market for gasoline that was the impetus for fairly rapid growth of the petroleum industry. The early finds of petroleum like those in Ontario and Pennsylvania were soon outstripped by large oil "booms" in Oklahoma, Texas and California.[2] The USA was the major Oil producer till 1949 and lost the position to the Arabian Gulf area after that. The OPEC was established in 1960 and dominated the focus of geo-politics. Realignment and synergy in the oil producers changed the global energy market and middle East got the lion’s share. Soon it became very rich and an active field of political intervention across the globe.
Even though middle east was dominant player in energy, it could not do any significant thing in technological development or even promotion, hence USA which was hub of technological discoveries, was at the centre stage. In 2020, the United States exported about 8.51 MMb/d and imported about 7.86 MMb/d of petroleum, making the United States a net annual petroleum exporter for the first time since at least 1949.[3]
During this energy boom period, discoveries in telecom and internet made the USA world leader.
We want to highlight how the resource driven economic engines play a role in defining the geopolitics. It clearly establishes a link between technological innovations and geo political dominance. We welcome the readers to draw their own further conclusions.
Coming back to block chain, the cryptocurrency technology is based on ‘digital coin mining’. Basically, a computer program (algorithm) is developed that has in-built features to not allow any duplication of a result of any operation (for example, think of the calculation of the final value of the pi fraction…an on going, non repeating, non terminating calculation). Every fixed stage of calculation will result in a ‘coin’. These coins are unique and once mined, cannot be counterfeited or traded (exchanged) outside of the pre-set boundary conditions of the computer program that they have been developed under. As the coins get mined, more and more computing power is required to mine them. So, mining of digital coins is a function of computing power and energy to power these computers. And as we know, computers work best in a cold and dust-free environment. Hence, countries having favorable climate and abundant energy will have the natural advantage in supporting mining.
Now, when we consider the emerging scenario of the world moving to a higher prevalence of digital currencies, we can see the emerging possibilities of a new world geopolitical scenario emerging.
Countries like Uzbekistan, Bhutan and Mongolia, for example, that have abundant energy resources, have a cold climate and are basically landlocked can emerge as the next target for the new East India Company derivatives – the crypto-mining conglomerates. There could be long-term contracts for setting up digital mines in these countries and offering the processed coins to the buyers. The buyers could be sovereign central banks or independent currency exchanges that may deal in a basket of coins like bitcoin, Ethereum, digibyte, etc.
These countries can very rapidly ramp up their capabilities by the technical inputs and collaboration of the countries that are the major markets for the currency systems.
So, a country like India could explore long term bi-lateral arrangements on a preferential basis with a geopolitical view of the emerging world order. Further it may also develop its cold and energy surplus areas like HP, Leh, Ladakh and Uttara Khand for digital mining.
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