To avoid volatility in the price of crypto, an Argentine community of 6,000 members hopes to raise funds by selling their mined crypto.
With the mayor’s blessing, the Argentine town of Sorradino in Santa Fe province is looking to mine virtual currencies to raise funds needed to modernize rail infrastructure and fight inflation instead of relying on banks and government loans.
According to a local news outlet, the city has already purchased six graphics cards and plans to buy an application-specific integrated circuit (ASIC). The city’s mayor, Juan Pio Drovetta, noted that the community supports the initiative, which he claims is not profiting from speculation but creating new tokens.
“We do not buy cryptocurrencies and try to make a profit through speculative activities through which [or] we win [or lose]. What we are going to do is generate cryptocurrencies, so we will always win.”
Drovetta added that Sorradino originally planned to collect between $540 and $624 per month of tokens “based on market prices,” suggesting the city would try to sell its mined tokens rather than lock them up. Drovetta also indicated that the city plans to pay taxes with mining revenues. This is after doing all the necessary research. He did not specify which crypto asset it intends to mine.
What’s the deal with mining?
Cryptocurrency mining involves verifying cryptocurrency transactions on the blockchain network and adding them to a distributed ledger. More importantly, cryptocurrency mining prevents double-spending of digital currency in a distributed network. At first, an ordinary person could mine bitcoins, but this is no longer the case. Today, successful bitcoin mining requires powerful computers and access to vast amounts of cheap electricity.
As in many other countries, the mining process has a bad reputation in Argentina due to sky-high electricity bills. These costs could disrupt the power supply of surrounding towns. Countries like China and Kazakhstan have been aggressively opposing crypto mining centers in their country.
Argentina’s inflation woes
The COVID-19 pandemic and inflation have put a strain on the Argentine city, and it is not easy for the local government to fund upgrades to the city’s rail infrastructure. Sorradino recently received its first basic train service in 33 years.
Even before the coronavirus hit, analysts predicted that Argentina would enter a third-year recession in 2020. And now, with the coronavirus, it is projected that Argentina will experience a contraction that topped the 11% contraction experienced in 1998-2002. In the early 20th century, Argentina was one of the wealthiest countries in the world, with a GDP per capita higher than that of many European countries.
The International Monetary Fund recently discouraged Argentina from using cryptocurrencies due to its $45B debt restructuring deal. “The people of Argentina who live in an environment with around 50% annual inflation, they realize that they need new technologies, they need new assets, they need a different path to get to a world of financial security,” said Anthony Pompliano.
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