Iceland’s cryptocurrency mining a big energy drain
The value of bitcoin may have stumbled in recent months, but in Iceland it has so far only known only one direction: upward. The stunning success of cryptocurrencies around the globe has had a more unexpected repercussion on this island of 340,000: It could soon result in an energy shortage in the middle of the Atlantic Ocean.
As Iceland has become one of the world’s prime locations for energy-hungry cryptocurrency servers — something analysts describe as a 21st century goldrush equivalent — the industry’s electricity demands have skyrocketed, too. For the first time, they now exceed Icelanders’ own private energy consumption and energy producers fear that they won’t be able to keep up with rising demands, if Iceland continues to attract new companies bidding on the success of cryptocurrencies.
Companies have flooded Iceland with requests to open new data centers to “mine” cryptocurrencies in recent months, even as concerns mount that the country may have to slow down
investments amid an increasingly stretched electricity generation capacity.
“There was a lot of talk about data centres in Iceland about five years ago, but it was a slow start,” Johann Snorri Sigurbergsson, a spokesperson for Icelandic energy producer HS Orka, told The Washington Post. “But six months ago, interest suddenly began to spike. And over the last three months, we have received about one call per day from foreign companies.”
“If all these projects are realized, we won’t have enough energy for it,” Sigurbergsson was quoted as saying.
Every cryptocurrency in the world relies on a so-called blockchain platform, which is needed to trade with digital currencies.
Tracking and verifying a transaction on such a platform is like solving a puzzle because networks are often decentralized and there is no single authority in charge of monitoring payments.
As a result, transaction involves an immense number of mathematical calculations, which in turn occupies vast computer server capacity — which requires a lot of electricity.
Located in the middle of the Atlantic Oceans and famously known for its hot springs and mighty rivers, Iceland produces about 80 per cent of its energy in hydroelectric power stations, compared to about six per cent in the United States. That and the cold climate make it a perfect location for new data-mining centres filled with servers in danger of overheating.
While some are sensing a new revenue source for the country that is mostly known as a tourist haven and low-budget airline hub, others are more concerned by a phenomenon that has so far mostly alarmed analysts due to its possible financial unsustainability. Some predictions have concluded that cryptocurrency computer operations may account for “all of the world’s energy by 2020,” or may already account for the equivalent of Denmark’s energy needs.