Bitcoin Miners Flock to Iceland in a New Gold Rush

When it comes to setting up shop as a crypto-miner outfit, frigid Iceland is hot, hot, hot right now – leaving many to ponder the value of hosting what amounts to a new gold rush in the country.

This small Nordic nation is known for a few notable things, starting with its Arctic Circle attributes – it’s a great place to see the Northern Lights! It’s also extremely green (nearly 100% of its energy is from renewable resources, including power stations that harness the island’s volcanic activity for geothermal energy). and of course, on the pop culture front, it spawned Bjork, and, famously, has a populace that still believes in fairies. All cool stuff (and apologies, Icelanders, if I’m being reductionist – I know there’s a lot more going on there besides all this).

Now, Iceland is becoming known for something else, too: being a great place to mine Bitcoin. The country has consistently invested in modernizing its computing infrastructure, and its data center capacity is among the greenest and most affordable in the world. In addition to benefiting from local renewable power generation, the chilly climate significantly helps with cooling, which is one of the top expenses in the data center business model.

According to the BBC, this has Bitcoin miners interested. Very interested.

Johann Snorri Sigurbergsson, a spokesman for Icelandic energy firm HS Orka, said that he expects Bitcoin mining operations to use around 840 gigawatt hours of electricity per year – compared to the 700 gigawatt hours the country’s population already uses to power homes.

"If all these projects are realized, we won't have enough energy for it," he told the BBC. "What we're seeing now can almost call it exponential growth, I think, in the [energy] consumption of data centers….I'm getting a lot of calls, visits from potential investors or companies wanting to build data centers in Iceland."

The Moonlight Project is one initiative that sees promise in Iceland. It’s a crypto-mining company that plans to mine Bitcoin, Bitcoin Cash, DASH and Litecoin on an industrial scale. Operations are set to begin in August 2018, with at least one data center in Iceland.

“We will establish our data centers in countries where the contractual electricity supply is clean and green, reliable, costs are the lowest, and that are politically stable,” the company said in its FAQ.

Could this demand for resources overwhelm the country’s energy grid, leaving the 340,000 residents of the place in the cold and the dark, just like their Viking ancestors centuries ago? Is it time to stock up on candles and propane generators? Maybe some thick animal pelts?

Well, not quite. It’s unlikely that the country would balk at ramping up energy production if there’s profit in it for the energy companies themselves. There’s also the tax issue – welcoming Bitcoin to its shores won’t come with obvious significant state revenue, unfortunately – unless it’s in the form of energy companies paying more as they increase their earnings. Bitcoin miners themselves will be largely tax-exempt.

As Pirate Party member Smari McCarthy tweeted: “Cryptocurrency mining requires almost no staff, very little in capital investments, and mostly leaves no taxes either.”

He added, “The value to Iceland/value generated ratio is virtually zero. Closer to zero the higher the value of cryptocurrencies.”

He also told the Associated Press: “Under normal circumstances, companies that are creating value in Iceland pay a certain amount of tax to the government. These companies are not doing that, and we might want to ask ourselves whether they should.”

Potential regulation and taxation could take some of the wind out of crypto-mining sails in some of these new “coin-rush” locations, but that could be a good thing given that some are asking whether mining is a dangerous bubble that’s set to burst, leaving all those new data centers and expanded energy facilities hollowed out and proverbially rusting. Bitcoin’s value is soaring – about $9000 to the dollar at this writing – but how long can that last?

“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.”

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