Bitcoin Mining In Iceland: What We Know, And How Iceland Could Benefit

The true story on cryptocurrency mining in Iceland is more complex than has been recently reported, a local expert says, but the opportunities are real.

Recent reporting on cryptocurrency mining in Iceland – in particular, of Bitcoin – has received a flurry of international attention, with some sources claiming mining has exceeded or soon will exceed the total household energy consumption in the country. Loki Lindarson, a Bitcoin entrepreneur who monitors cryptocurrency mining in Iceland, told Grapevine that the real story is more nuanced than this.

“We don’t have a very accurate count of how much mining is happening in Iceland,” he told us. “We also don’t know what cryptocurrencies are being mined.”

Loki has been following mining activity in Iceland since its inception. By his estimates, somewhere between 2% and 8% of the world’s cryptocurrency mining is happening in Iceland, but the exact numbers are not available.

“We don’t know who owns all these set-ups and what deals they’ve made at what level,” he says, referring to the tax breaks heavy industry gets for electricity consumption. “These people are probably so focused on what they’re doing, and afraid of getting caught, that they’re likely hooking up their set-ups to home electricity or commercial real estate.”

Loki believes the interest in mining in Iceland is real and substantial, and has been actively recommending to members of Parliament that they get official numbers on this through parliamentary inquiry. “That’s the best way to talk about this,” he says.

“Mining also makes a lot of sense in Iceland because it’s redundant data. The data traffic itself is minute,” Loki points out. Iceland is roughly equidistant to North America and Europe, making hosting data irrelevant, while the cost of bandwidth in Iceland is “ridiculous compared to the EU or the US, which is why no one hosts here. It’s not because we don’t have the facilities; we do.” With mining, this is no longer a factor due to the small amount of data trafficked.

China may shut down mining within the next couple of months, which presents an opportunity for Iceland, Loki says. “Where will mining go? Wherever there’s cheap electricity, which is here, which means we’re going to be inundated with people looking to exploit Iceland’s electricity. Right now I don’t feel like we’re positioned to benefit from that.”

Part of the money from mining could go back into the electrical grid and upgrading the fiberoptic network through a “cryptocurrency reserve”, functioning in much the same way a money reserve at a central bank works.

The interest, though, is absolutely there.

“This could have a huge impact in Iceland,” Loki says. “Or it could go askew, unless we have a real dialogue about it, involving everyone in Iceland. Get some accurate information on mining activity, and get the government involved, so we don’t miss the boat.”