The geothermal spas of Grindavík are a great place to relax after spelunking through the Skaftafell Ice Cave in Iceland, but aside from this country’s many tourist attractions, there’s another reason people are flocking to The Land of Fire and Ice.
In fact, there are several reasons: (1) Cheap, renewable electricity, (2) cold temperatures and (3) bitcoin mining.
Iceland’s Harsh Conditions Are Excellent For Cryptomining
Iceland might have a reputation for cold temperatures, but it’s equally notorious for volcanic eruptions and breathtaking waterfalls. These naturally-occurring phenomena allow Icelanders to harvest nearly all heating and electricity in the country from hydroelectric and geothermal power sources. This makes electricity in Iceland both green and inexpensive.
By combining the elements of affordable, green energy with naturally-cold temperatures (that prevent computers from overheating), it’s easy to see how Iceland offers the perfect conditions for a bitcoin-mining storm. In fact, to the bitcoin-mining firms that profit from these conditions, Iceland might be viewed as dream come true—a “unicorn cryptomining country,” so to speak.
However, there could be trouble in crypto-mining paradise. As government leaders in Iceland watch their energy meters hit the red zone, politicians and residents are starting to ask a very important question: Is cryptomining good or bad for Iceland?
Iceland Is Struggling to Manage Bitcoin’s Energy Demands
The recent explosion of bitcoin-mining in Iceland has led to jaw-dropping upticks in energy use. According to Johann Snorri Sigurbergsson from the Icelandic energy company Hitaveita Sudurnesja, energy consumption used for cryptomining in Iceland will double from 50 megawatts to 100 megawatts in 2018, which means that cryptomining will soon use more energy than all of the homes in Iceland. This is the first time that cryptomining in a single country threatens to outpace other uses of energy.
Earlier this year, Sigurbergsson told the Associated Press, “Four months ago, I could not have predicted this trend—but then bitcoin skyrocketed and we got a lot more emails … Just today, I came from a meeting with a mining company seeking to buy 18 megawatts.”
Globally, bitcoin-mining uses .33 percent of the globe’s energy resources at the time of this writing. Some speculate that managing the global bitcoin network will consume more energy than the United States in the years ahead. Will governments stand idly by, watching cryptocurrencies burn through their energy reserves?
Iceland Could Tax Cryptocurrency Mining
As a member of Iceland’s parliament, Pirate Party politician Smari McCarthy expressed concern about the dramatic spike in energy use in an interview with the Associated Press. His worried statements reflect a growing sentiment that Iceland is giving away more than it’s getting with respect to cryptomining. “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,” McCarthy said. “That can’t be good.”
Iceland’s Pirate Party rose to prominence in the wake of the country’s disastrous banking collapse in 2008, and it currently holds 10 percent of the seats in parliament. As the leader of the Pirate Party, McCarthy does not view the speculative aspects of cryptocurrency kindly. He thinks it should be taxed.
“Under normal circumstances, companies that are creating value in Iceland pay a certain amount of tax to the government,” McCarthy said. “These companies are not doing that, and we might want to ask ourselves whether they should.”
Arguably, the idea of foreigners moving in to profit off Iceland’s rich natural resources without benefiting the residents does not seem fair. Considering the fact that the Pirate Party controls 10 percent of Iceland’s parliament, could the voice of its leader be an accurate reflection of what’s to come?
Profitable Cryptomining Should Not Depend on Location
As The Land of Fire and Ice continues to wrestle with questions about energy consumption, taxation and cryptomining in the months and years ahead, only time will tell if the bitcoin mining experiment in Iceland can succeed.
Will Iceland serve as a canary in the bitcoin mine letting us know the dangers of relying on location to profitably mine cryptocurrency? Or will Iceland serve as an example of the potential for mutually-profitable relationships between national governments and cryptominers?
Hopefully, the last option proves true. In the meantime, brave entrepreneurs and cryptomining visionaries will continue to forge ahead, finding revolutionary ways to mine bitcoin that don’t depend on “location, location, location.”
Gear Token is one such project that seeks to find cost-effective, green-energy solutions to affordably mine cryptocurrencies while benefiting the environment. With daily advancements in renewable energy creation—through solar, hydroelectric and biomass discoveries—Gear Token and similar projects may not have to rely on crypto-friendly unicorn nations like Iceland to profitably mine bitcoin in the future.
Jeremy Hillpot is an investment fraud litigation consultant. Fascinated by emerging technologies like blockchain and the laws and market trends that follow them, Jeremy’s background in consumer fraud litigation provides a unique perspective on a vast array of topics including investments, startups, cryptocurrencies and law.