Iceland bitcoin miners using more energy than homes, but may face tax bite
ICELAND is expected to use more energy “mining” bitcoins and other virtual currencies this year than it uses to power its homes.
With massive amounts of electricity needed to run the computers that create bitcoins, large virtual currency companies have established a base in Iceland, which is blessed with an abundance of renewable energy. The industry’s relatively sudden growth prompted Smári Mccarthy, a lawmaker from the Pirate Party, to suggest taxing the profits of bitcoin mines.
The initiative is likely to be well received by Icelanders, who are sceptical of speculative financial ventures after the country’s catastrophic 2008 banking crash.
“Under normal circumstances, companies that are creating value in Iceland pay a certain amount of tax to the government,” Mccarthy told The Associated Press. “These companies are not doing that, and we might want to ask ourselves whether they should.”
The energy demand has developed because of the soaring cost of producing and collecting virtual currencies. Computers are used to make the complex calculations that verify a running ledger of all the transactions in virtual currencies around the world.
In return, the miners claim a fraction of a coin not yet in circulation. In the case of bitcoin, a total of 21 million can be mined, leaving about 4.2 million left to create. As more bitcoin enters circulation, more powerful computers are needed to keep up with the calculations – and that requires more energy.
Johann Snorri Sigurbergsson, a business development manager at the energy company Hitaveita Sudurnesja, expects Iceland’s virtual currency mining to double its energy consumption to about 100 megawatts this year. That is more than households use on the island nation of 340,000, according to Iceland’s National Energy Authority.
“What we are doing here is like gold mining,” said Helmut Rauth, who manages operations for Genesis Mining, a major bitcoin mining company. “We are mining on a large scale and getting the gold out to the people.”
German company Genesis Mining moved to Iceland in 2014 when the price of bitcoin varied from $350 (£250) to $1,000 (£720). Today, one bitcoin is worth about $8,600 (£6,300), according to Coindesk, after peaking at almost $19,500 (£14,100) in December.