Iceland is expected to use more energy mining bitcoin than powering its homes this year.
Large virtual currency mining companies have established a base on the island, which has an abundance of geothermal and hydroelectric power plants.
And with massive amounts of energy needed to run the computers that create bitcoins, it is seen as an ideal base.
Johann Snorri Sigurbergsson, business development manager at the energy company Hitaveita Sudurnesja, said he expected Iceland’s virtual currency mining to double its energy consumption to around 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.
Among the main attractions of setting up bitcoin in Iceland is the natural cooling for the computer servers and the competitive prices for Iceland’s abundance of renewable energy.
The energy demand has developed because of the soaring cost of producing virtual currencies.
Computers are used to make 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, computers need to get more powerful to keep up with the calculations – and that means more energy.
The growth has prompted Smari McCarthy, a lawmaker for Iceland’s Pirate Party, to suggest taxing the profits of bitcoin mines.
‘Under normal circumstances, companies that are creating value in Iceland pay a certain amount of tax to the government,’ McCarthy said.
‘These companies are not doing that and we might want to ask ourselves whether they should.’
McCarthy questioned the value of bitcoin mining for Icelandic society, saying residents should consider regulating and taxing the emerging industry.
‘We are spending tens or maybe hundreds of megawatts on producing something that has no tangible existence and no real use for humans outside the realm of financial speculation,’ he said.
‘That can’t be good.’