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Iceland is the new energy home of cryptocurrency mining companies

posted onFebruary 20, 2018
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The value of bitcoin may be down more than 50% from its highs in December but that doesn't stop Iceland from becoming one of the world's prime locations for energy-hungry cryptocurrency servers. Companies have flooded the Nordic island nation with requests to open new data centers in recent months, as the naturally cold climate and access to renewable energy make Iceland an ideal cryptocurrency mining destination. In cryptocurrency networks, mining is a validation of transactions.

As the specialised chips used to mine most cryptocurrencies produce huge amounts of heat when run at their maximum efficiency, it is no surprise that Iceland's Arctic Cicle air offers natural cooling for computer servers so companies don't need to invest in expensive air-conditioning. With massive amounts of electricity needed to run the computers that create bitcoins, Iceland’s abundance of renewable energy from geothermal and hydroelectric power plants also lures firms.

Johann Snorri Sigurbergsson, business development manager at Icelandic energy firm HS Orka told the BBC: "If all these projects are realised, we won't have enough energy for it." He also said that he estimates Iceland's virtual currency mining will double its energy consumption to about 100 megawatts this year. That is more than the country's households, according to Iceland's National Energy Authority. 

“The economics of bitcoin mining mean that most miners need access to reliable and very cheap power on the order of 2 or 3 cents per kilowatt hour. As a result, a lot are located near sources of hydro power, where it’s cheap,” Sam Hartnett, an associate at the nonprofit energy research and consulting group Rocky Mountain Institute, told The Washington Post in December. 

Genesis Mining, a major bitcoin mining company founded in Germany, moved to Iceland in 2014. The company has opened three mining facilities in the North Atlantic country. "What we are doing here is like gold mining," Helmut Rauth who manages operations for Genesis Mining told the Associated Press. "We are mining on a large scale and getting the gold out to the people" he added.

Iceland's Svartsengi power plant (HS Orka)
Iceland's Svartsengi power plant (HS Orka)

Others have a different opinion. MP Smari McCarthy of Iceland's Pirate Party that entered Iceland’s Parliament after the 2008 financial crash,  questioned how beneficial the boom was to the country's economy.  “Cryptocurrency mining requires almost no staff, very little in capital investments, and mostly leaves no taxes either," McCarthy posted on Twitter. "The value to Iceland … is virtually zero.He also told the AP: "We are spending tens or maybe hundreds of megawatts on producing something that has no tangible existence and no real use for humans outside the realm of financial speculation.That can't be good.”

But the legislator also took on Twitter to  clarify previous reports that quoted him as saying he was keen to tax Bitcoin mining firms. “Always, always, always, my primary goal is to move society forward in fruitful ways. I definitely don't want to end up as the bad guy in the eyes of the cryptocurrency community. On the contrary, I want to work with you guys to strengthen this innovation ” he wrote.

Jason Scott, a Bitcoin entrepreneur who monitors cryptocurrency mining in Iceland told The Reykjavik Grapewine that the true story on cryptocurrency mining in Iceland is more complex than has been recently reported but the opportunities are real. 

 “Where will mining go? Wherever there’s cheap electricity, which is here, which means we’re going to be inundated with people looking to exploit Iceland’s electricity. Right now I don’t feel like we’re positioned to benefit from that.” he said. “Get some accurate information on mining activity, and get the government involved, so we don’t miss the boat.” Scott added.

Mines, like oil wells, eventually run dry. Who knows if the same will happen to bitcoin ones.Until then, one thing is certain: as crypto-currencies rise in popularity, they contribute to additional power demand in the technology sector.