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Bitcoin in the Boot: Italy faces cryptocurrency challenges

10 September 2017 21:00, UTC
Vsevolod Gnetii

European stories: Hindrance and drawbacks of BTC mining in the Apennine Peninsula

Bitcoin mining-related issues in Italy are top picks in the digital mass media with 3,5 million likes on the website of the leading Italian newspaper la Repubblica.

Italian BTC community concentrates mostly on costs and profits of the enterprise. The leading Italian bitcoin consultant Stefano Pepe, has been recently quoted in a special report program at the first national public television RAI 1 According to him, nowadays there are a few bitcoin millionaires (euro equivalent) in Italy. The most striking case, as the expert points out, is an underage student of 15 years old owning 1,700-1,800 bitcoins. Another professional from the Italian BTC expert community, “alternative currencies philosopher” (as he defines himself), Sebastiano Scrofina, goes even further by having declared that in Italy “there are undergraduate students going to attend their high school classes with a smartphone containing thousands of bitcoins”. Both experts agree that BTC owners, the real euromillionairs, prefer to keep low profile, by avoiding publicity and mass media attention. One of the reasons for it is a wish to avoid taxation which is very high in Italy, with total fiscal pressure reaching the peak of 42,3% in 2017, according to the statement released by the National Statistics Office (ISTAT). Moreover a possible mafia-style shakedown can't be ruled out as well.

Apart from the above-mentioned reasons, the most debated issue is the utility, profitability and benefits originating from BTC mining on the territory of the Boot. According to Stefano Pepe’s estimates, maximum daily (24-hour mining activity) bitcoin mining net profit in Italy is 50-euro equivalent. Yet it can also be as low as 25-euro equivalent.

Michele Ficara Manganelli, president of Assodigitale, new technologies monitoring association, contests the afore-mentioned BTC profitability figures, referring to his own personal practical experience. Mr. Manganelli affirms that daily bitcoin mining net profit does not exceed 20-euro equivalent with high probability of being pegged at 15-euro equivalent rate. First and foremost obstacle for BTC mining profitability increase being, according to Mr. Manganelli, high electricity cost, but also, last but not least, swift obsoleteness rate of mining machinery and equipment – at maximum three months and a half.

Electricity problem in Italy is double-faced: costs and amount of consumption. Both aspects are conjoined as Siamese twins. The lower is consumption level the lower is the price/cost. The so-called consumer protection cost level is linked to maximum load level for residential consumption varying from 3 kWh to 6 kWh and costs fluctuating from 0,19 to 0,35 euro per kilowatt. There is also flexible discount scheme applicable to maximum load level (6 kWh) with maximum annual consumption level of 5,000 kWh, which makes an average 1 kWh cost of about 0,22-0,23 euro.

Even though some Italian electricity suppliers envisage maximum load level for residential purposes as high as 15 kWh, it is rarely applicable. When these levels are exceeded, the consumer passes to industrial consumer category, which reserves some pitfalls to a potential BTC miner. First, industrial consumer cannot have its own production activity in residential facilities and thus will be compelled to either rent or buy an industrial facility site, which means additional costs. Second, he must register his enterprise and indicate his trade name and business activity to the competent authority, thus automatically entailing fiscal inspections and mandatory taxation. In the end, even if discount prices for major consumption amount are applied the final price will equal more or less that of residential consumer price of about 0, 22-0,23 euro, accompanied by high operating and management costs, high social security contributions and high personal income taxation.

One must also consider that, according to most Italian experts, the required daily maximum load level for successful BTC mining shall not be lower than 24 kWh. The difference in favor of Bulgaria is quite evident: 24 kWh x 0,23 euro in Italy vs. 24 kWh x 0, 09 euro makes daily difference of 100 (one hundred!) euros in daily costs. That is why aspiring Italian BTC miners are migrating to Bulgaria on a massive scale.

And the remaining ones? They resort to some makeshift measures, expedients and tricks.

An anonymous, but successful (according to his own words) young Italian BTC miner confessed on a bitcoin-oriented forum that he…“had made a bargain” with his folks, obtaining from his father to use 3 kWh maximum load level (out of total of 6 kWh available in his household) exclusively for mining purposes.

One other bitcoiner told specialized digital website Wired.it that he had distributed machinery and equipment in more than one family residential facilities, including countryside and seaside houses, in order to avoid overload and to make the most of residential electricity supply costs and benefits. The same bitcoiner also stated that he uses renewable energy sources, i.e. solar panels, belonging to his family, in order to increase electric capacity.

Finally, Stefano Pepe has invented a BitQuota, a start-up based on shareholding in mining activity. BTC expert purchases a rater big-size farm at the cost of 4 thousand euro, distributing shares of different dimensions/amounts/costs among “shareholders” which receive profits in proportion of invested quotas. According to the mastermind, in four months, his shareholders have paid back about 70% of invested bitcoins, while, if the revenue is converted in euro, their net profit would be 6-7 times higher than their investment calculated in euro.