by Kieran Smith
Despite being a remote volcanic island, the economic implications of the cryptocurrency mining sector are proving vulnerable for Iceland.
Iceland’ Cryptocurrency Mining Industry
The countries’ reliance on cryptocurrency mining is now something that “cannot be excluded as a risk factor,” says finance minister Bjarni Benediktsson, who has expressed concern that if the cryptocurrency boom was to end, then Iceland’s economy could bust.
With its cold climate ideal for cooling computer equipment, Iceland has long been recognized as the top crypto- mining destination in the world and is the first nation to use more electricity mining cryptocurrencies than on powering its households.
Iceland’s freezing temperature is the perfect temperature for the powerful computers used in cryptocurrency mining. A company setting up mining operations in the country can save a great deal on air conditioning costs compared to locating their mining operation somewhere in the tropics. In addition, Iceland’s plentiful renewable hydro and geothermal power, from renewable sources powered by the island’s volcanoes, provides ready fuel for the extremely energy-intensive process of mining bitcoin.
The economic activity brought by the mining has spurred the country’s recovery from the 2008 financial crash, which it took particularly harshly.
Miners Interested in Iceland
The perfect conditions have meant interest continues to rise from miners, said Styrmir Hafliðason, security and quality manager at Verne Global data center, stating that “We receive multiple requests per week from them.”
There’s undeniable interest – 90 percent of the power consumption of Iceland’s data centers last year was dedicated to the mining of cryptocurrencies, according to a report by KPMG, which also speculated the activity was only likely to increase soon.
However, due to their disproportionate presence in the Icelandic economy, the speculative value of cryptocurrency puts Iceland at risk, according to the report which describes the market outlook as “fragile.”
However, it also presents a risk, according to Johann Snorri Sigurbergsson, a spokesperson for Icelandic energy firm HS Orka. Iceland’s cryptocurrency mining industry eats up to 840-gigawatt hours of electricity a year to support its servers and cooling equipment, a massive boon for the nation’s electricity companies. This is around two to three per cent of total consumption on the island.
The real risk, according to Magnus Eyjolfur of Advania, is the country’s dependence on another industry attracted by the abundant geothermal energy – aluminum smelters, which use about 70 percent of its energy supply.