Iceland has long been a prominent hub of bitcoin mining due to 98% of its electricity coming from renewable geothermal energy and a cold climate favoring mining farms which must be kept cool can run massive air conditioning bills in warmer areas.
The power usage effectiveness (PUE) of the country is as low as 1.03, almost twice as cost-effective as many nearby countries in continental Europe where the average is 1.78. As such, Iceland is home to international mining firms like Genesis and BitFury which have set up in the nation to capitalize on the natural advantages and now dwarf many of the local mining enterprises. The establishment of these enterprises was motivated in some cases by the impact of the 2008 financial crisis on the Icelandic economy which wiped 60% of the value from the Iceland krone, the local fiat currency.
Bitcoin mining is so prevalent that the energy consumption of mining in Iceland is set to overtake that of the households of the 340,000 locals living on the small island. 600 mining rigs were famously stolen in a major heist earlier this year, making headlines across the world and drawing attention to the scale of some of the local mining farms.
However, bitcoin mining took a huge hit after the market crashed in December 2017, sending the price of one BTC from an ATH of $19,783 to $6,362 at the time of writing and causing many mining enterprises around the world to mine BTC at cost or even at a loss, leading to speculation that the days of the Icelandic mining boom were over.
Halldór Jörgensson, chairman of Borealis Data Center confirmed this in a recent interview with Red Herring, stating that the infrastructure has now been created in Iceland to pursue other blockchain-related business ventures:
“The demand is…shifting more towards the pure blockchain business. So you could say that the bitcoin wave, the big wave of bitcoin demand, has helped us to build out really fast, because there were really aggressive or interested parties who wanted to do things and we managed to do the build-out.
We strongly believe that when the whole bitcoin thing has settled down to some kind of a level that is not as crazy as it was a year ago [...] another wave that crops up that will utilize these infrastructures that have been built up during the bitcoin mining phase.”
It may well be that bitcoin mining will suffer a permanent decline in the country, but instead of closing up shop completely, those already working in the cryptocurrency space are now exploring other options - blockchain enterprise, a growing industry that is set to reach a value of $2.3 billion by 2021.
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