New gold rush: Energy demands soar in Iceland for bitcoins
KEFLAVIK, ICELAND » 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 the North Atlantic island nation blessed with an abundance of renewable energy.
The new industry’s relatively sudden growth prompted lawmaker Smari McCarthy of Iceland’s Pirate Party to suggest taxing the profits of bitcoin mines. The initiative is likely to be well received by Icelanders, who are skeptical 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 enter circulation, more powerful computers are needed to keep up with the calculations — and that means more energy.
The serene coastal town of Keflavik on Iceland’s desolate southern peninsula has over the past months boomed as an international hub for mining bitcoins and other virtual currencies.
Local fishermen, chatting over steaming cups of coffee at the harbor gas station, are puzzled by the phenomenon, which has spawned oversize construction sites on the outskirts of town.
Among the main attractions of setting up bitcoin mines at the edge of the Arctic Circle is the natural cooling for computer servers and the competitive prices for Iceland’s abundance of renewable energy from geothermal and hydroelectric power plants.
Johann Snorri Sigurbergsson, a business development manager at the energy company Hitaveita Sudurnesja, said he expected 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.
“Four months ago, I could not have predicted this trend — but then bitcoin skyrocketed and we got a lot more emails,” he said at the Svartsengi geothermal energy plant, which powers the southwestern peninsula where the mining takes place.
“Just today, I came from a meeting with a mining company seeking to buy 18 megawatts,” he said.