(7 Feb 2018) LEAD IN
Despite a rollercoaster ride in the price of Bitcoin – the farms which mine the cryptocurrency are continuing to boom in Iceland.
But the extra computer power required for them to stay competitive has raised concerns over their long term environmental impact.
This desolated peninsula in southwestern Iceland has emerged as a frontier in the global rush for Bitcoin and other energy intensive cryptocurrencies.
The blockchain system behind Bitcoin is programmed so that everyone can hypothetically profit from its maintenance.
The incentive has spiralled to a frenzy with the price of one Bitcoin rising at one point to nearly US$ 20,000 over the past year, only to fall below US$6,000 this week.
Ever more computing power is needed to beat the competition, creating a competitive cycle that is raising concerns about Bitcoin’s environmental toll.
Data centres around the world competing for new Bitcoins (a process known as mining) are expected to consume as much electricity as Argentina this year, according to analysts at the American bank Morgan Stanley.
At the edge of the Arctic, Bitcoin miners seek natural cooling and competitive prices for Iceland’s abundance of renewable energy.
The Associated Press visited the largest of three Bitcoin facilities on the outskirts of Keflavik, known as “Mjolnir” after the hammer of Thor, the Norse god of thunder.
This cryptocurrency farm is doubling in size, with five 50-metre (55 yards) warehouse buildings under construction.
“What we are doing here, like Bitcoin mining, is like gold mining,” says Helmut Rauth, manager at Genesis Mining, one of world’s largest Bitcoin mining companies, according to own accounts.
Inside the mine, rows of computer rigs line the walls, each powering about six graphics cards, run around the clock.
The computers are tasked with solving maths problems whose solutions are used to validate new Bitcoin transactions. In return, miners claim a fraction of a coin not yet in circulation. Bitcoin’s algorithm limits the total amount of coins ever available to 21 million. About 80 percent of Bitcoins have already been mined, or nearly 17 million.
The validation process was a garage-operation on private computers at the early age of Bitcoin when returns were low.
Genesis Mining, founded in Germany, was an early adopter of industrialising the process, first moving to Iceland in 2014 when the price of Bitcoin fluctuated from 350 US Dollars to 1000 US Dollars.
Today the Bitcoin is valued at around 7,000 US Dollars, after peaking at around 19,000 US Dollars in December last year.
The currency took a hit in January when China announced it would move to wipe out its Bitcoin mining industry, following concerns of excessive electricity consumption.
Rauth says Bitcoin should not be singled out as environmentally taxing. Computing power always demands energy, he argues, comparing Bitcoin to credit card transactions and internet research.
“How much energy is needed for that? This is the same global impact,” he explains.
Keflavik’s Bitcoin farms are powered with electricity from the Svartsengi geothermal energy plant about 20 kilometres away.
Currently, 50 megawatts are estimated to be used for mining Bitcoin and other cryptocurrencies in Iceland.
Compared with data from Iceland’s National Energy Authority, that equals about half of what the island nation of 340,000 people use to power its homes.
An energy expert at Svartsengi told the AP that the cryptocurrency industry would likely double its usage this year, given the current growth and interest from foreign investors.
Johann Thor Jonsson, director of Data Center Iceland, a business organisation, says Iceland had all the ‘ingredients’ for a successful Bitcoin base.
You can license this story through AP Archive:
Find out more about AP Archive: