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| Philip Salter, head of operations at Genesis Mining, poses inside the bitcoin factory 'Genesis Farming' near Reykjavik, on March 16, 2018. At the heart of Iceland's breathtaking lava fields stands one of the world's largest bitcoin factories at a secret location rich in renewable energy which runs the computers creating the virtual currency. (AFP/Halldor Kolbeins) |
At a secret
location in the midst of one of Iceland's breathtaking lava fields stands a
warehouse whose non-descript siding belies the fact it is ground zero in a
digital gold rush for cryptocurrencies that is burning through more electricity
than Icelanders' homes.
Iceland's
combination of fire and ice not only makes it a stunning site to film parts of
the medieval fantasy epic Game of Thrones.
It also
offers a unique combination of cheap renewable energy and free air conditioning
that is making it a promised land for those "mining" virtual
currencies, including bitcoin, using powerful computers that are voracious
users of electricity and throw off lots of heat.
And noise.
The din
from shelves and shelves of computers whirring inside the 400-square-metre
(4,300-square-foot) warehouse rivals a jet during takeoff.
Unlike the
dollar and the euro, bitcoin is not issued by central banks. Instead it is
"mined" or created in computer "farms" like this one.
It uses
computers souped up with six graphics cards tasked with the heavy lifting of
thousands of thousands of calculations needed to solve complex algorithms to
process bitcoin transactions and be rewarded with bitcoins in exchange.
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Cheap and
cool Iceland
"It's
possible for everyone to do it at home. There is no one stopping you (and)
there are no technical limitations," said Philip Salter, head of
operations at Genesis Mining, told AFP.
Last year
saw a meteoric rise of hundreds of virtual currencies led by bitcoin, which was
fetching almost $20,000 per unit in December as both amateur and professional
miners jumped onto the bandwagon.
Home miners
often use an old computer, have no choice where they operate, and are lucky if
they get a fraction of a bitcoin every now and then.
Professionals
like Genesis Mining need to invest serious amounts to build and equip a
facility like this one with a surface area a third of an Olympic-size pool, but
which has a much greater chance of catching part of the 12.5 bitcoins created
every ten minutes.
They can
choose where to set up operations, however, and that choice can have a huge
impact on their profits as the price of the electricity to power and cool the
computers varies considerably from country to country.
Iceland is
attractive for cryptocurrency mining because of its cheap electricity, which
has the added advantage of being generated from clean geothermal energy.
At a 0.065
euros ($0.081) per kilowatt per hour before tax, the cost of electricity is
nearly half the EU average.
This makes
Iceland one of the most competitive nations in Europe after Serbia, Macedonia
and Bosnia.
But Iceland
also has an advantage in its average annual temperature is about five degrees
Celsius (41 Fahrenheit), meaning mining farms can for most of the time just
suck in cool air from the outside instead of running energy-hungry air
conditioners.
The power
usage efficiency "is really good in Iceland because of the natural
cooling," said Johann Snorri Sigurbergsson, director of business development
at Iceland's power company HS Orka.
Shocking
rise in demand
A growing
number of firms like Genesis Mining, which was previously based in Bosnia, have
chosen to set up shop in Iceland, which means demand for electricity has shot
up.
"The
demand has been increasing exponentially, especially the last three
months," said Sigurbergsson.
The
increase has come as the price of bitcoin has plunged from its peak of nearly
$20,000 to below $9,000 currently, with analysts saying that the price decline
has made operating costs even more of a concern for miners.
Salter, who
fears the growing competition in the sector, said bitcoin's "price isn't a
very good indicator on how bitcoin mining industry is doing".
He may not
have that much more competition from neighbours as Sigurbergsson said HS Orka
"will not be able to supply all the demand" from miners wanting to
set up operations.
He said his
firm is "in the great position of we can pick and choose who we can do
business with".
HS Orka
estimates that Iceland's three largest bitcoin farming companies in 2018 will
consume more electricity than the nation's 350,000 inhabitants.
Miners also
have another worry: Even a virtual gold rush attracts real thieves.
Between
December 2017 and January 2018, equipment worth an estimated 1.6 million euros
was stolen.
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