Is Iceland the “Unicorn” of Green-Friendly Bitcoin Mining?
Maybe Not For Much Longer…
The geothermal spas of Grindavík are a great way to relax after spelunking through the Skaftafell Ice Cave, but aside from Iceland’s many tourist attractions, there’s another reason people are flocking to “The Land of Fire and Ice”: Bitcoin mining.
In fact, to the Bitcoin-mining firms that profit from Iceland’s cold temperatures and constant supply of cheap, renewable energy, Iceland is the “unicorn” of green-friendly cryptomining.
But will the perfect mining conditions last forever? As politicians and the residents of Iceland begin to question whether cryptomining is good for their county, we could see things getting more difficult for Bitcoin miners in the future.
Why Is Iceland Perfect for Bitcoin Mining?
Iceland has a reputation for freezing temperatures, but it’s equally notorious for volcanic eruptions and breathtaking waterfalls. These naturally-occurring phenomena allow Icelanders to source nearly all of their heating and electricity 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.
However, there could be trouble in crypto-mining paradise. Government leaders in Iceland are watching their energy meters hit the red zone, and they’re starting to talk about new regulations that could put a dampener on the Bitcoin party.
Iceland Is Struggling to Manage Bitcoin’s Energy Demands
In fact, the recent explosion of Bitcoin-mining in Iceland has led to jaw-dropping upticks in energy use. According to Johann Snorrie Sigurbergsson from the Icelandic energy company Hitaveita Sudurnesja, energy consumption used for cryptomining in Iceland was going to double from 50 megawatts to 100 megawatts in 2018. which means that crypto-mining 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.
As for Iceland, in early 2018, Sigurbergsson told the Associated Press, “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 .30% 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. As this chart from Digiconomist shows, Bitcoin’s global energy consumption already exceeds the consumption of various nations:
Will governments like Iceland take action to stop cryptocurrency mining activities that demand a lot of energy? Or, will they come to see that cryptocurrencies come with benefits that make the energy expenditure worth the cost (i.e., they’re a source of lucrative tax revenue).
Iceland Could Tax Cryptocurrency Mining
Iceland parliament member (and the leader of the Pirate Party) Smary 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. McCarthy said:
“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.”
McCarthy’ Pirate Party rose to prominence in the wake of the Iceland’s disastrous banking collapse in 2008. It currently holds 10 percent of the seats in parliament, and it has set its pirate eyes on Bitcoin and the profits Iceland could earn by taxing cryptocurrency mining operations.
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…These companies are not doing that, and we might want to ask ourselves whether they should.”
Considering that many of the cryptomining operations in Iceland are foreign-owned — and moving in to profit off Iceland’s rich natural resources without benefiting the residents — most will admit that the situation doesn’t seem very fair for the nation. So maybe it’s only right for the country to tax this new and lucrative cottage industry.
The Pirate Party controls 10 percent of Iceland’s parliament, so perhaps the voice of its leader is an accurate reflection of what’s to come.
This tweet from McCarthy in 2018 makes a pretty clear case for taxes:
“Cryptocurrency mining requires almost no staff, very little in capital investments, and mostly leaves no taxes either. The value to Iceland… is virtually zero.”
Let’s Keep Our Hopes Up for the Unicorn of Bitcoin-Mining Nations
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 by letting us know the dangers of relying on location to profitably mine cryptocurrency? Or, will Iceland serve as an example for a mutually-profitable brinkmanship between national governments and cryptominers?
Hopefully, the last option proves true, and crypto-miners can find a way to stay in the green in Iceland. In the meantime, perhaps some brave entrepreneurs and cryptomining visionaries will discover new and revolutionary ways to mine Bitcoin — that don’t depend on “location, location, location.”