Iceland is a country that few people would have visited. Despite its stunning natural beauty consisting of volcanoes, geysers, hot springs and lava fields, the Nordic island is isolated from the rest of Europe and only has direct flights from a dozen airports.
Knocking England out of Euro 2016 brought some attention to the 300,000-people nation, but hot springs and sporting triumphs aside, Iceland has more recently become rather well-known for its crypto-friendly environment – here’s why.
Cheap energy
It seems the UK is never more than a few months away from an energy price rise, but it’s a different story in Iceland. Mainly due to its location, Iceland is the world’s most green producer of energy, with 100% coming from renewable resources. There’s therefore an abundance of it being produced compared to the relatively small population, meaning it can be sold at a low price. Ideas to produce a cross-sea cable to the UK have been discussed as a method to ease energy prices here, but nothing has yet come to fruition.
Naturally, it requires a lot of energy to mine cryptocurrencies such as the most expensive one, Bitcoin. With only around three million Bitcoins left to be mined, the chances of successfully mining them (in more technical terms, your computer solving incredibly difficult mathematical problems to verify transactions on the Blockchain and claim the 12.5Btc reward) is slim.
So, even more energy is needed to claim a share of a smaller proportional reward. Mining firms are thus needing an even greater amount of energy than previously to reap the same reward. That’s why the cheap energy prices of Iceland are so appealing. In the UK, running costs for mining farms in terms of energy alone would be off the scale.
Mid-Atlantic Ridge situation
After touching upon its natural assets as attractions for visitors, Iceland’s climate could be considered a deterrent. Of course, at the height of summer temperatures can reach the 20s (sometimes even the mid-20s). But usually the average temperature resides around the 10-15-degree mark in the summer, and 1-5 degrees from October to April. The climate is far more consistent than other European nations where temperatures vary within a range of 40 degrees across a whole year.
Why is this? It’s down to the Mid-Atlantic Ridge. This is a mid-ocean ridge cause by the Eurasian and North American tectonic plates meeting. One has slid over the top of the other, causing the ridge to form. However, it was not ‘pushed’ up far enough to break through to the surface and remains submerged underwater – apart from the section of the ridge that spans across Iceland’s mainland.
Nice Geography lesson, but why are tectonic plates and cryptos related? The Mid-Atlantic Ridge has a heavy influence on tidal patterns, which subsequently dictates a lot of climate conditions. In Iceland’s case, it ensures there’s cool air pretty much all year round. As well as electricity cost to harness the power to mine, a second high expenditure in mining cryptocurrencies comes from the cost of cooling. The computers performing the mining can become extremely hot, yet the cool and predictable (in that temperature is consistent) climate provides a natural cooling solution.
It’s not all good news for Iceland though…
Despite its clear attraction for mining companies, some subsequent negatives are being felt by Iceland.
Environmentally, burning through as much energy as the crypto mining companies are doing is not sustainable. Yes, it’s cheap and available at present, but that’s not necessarily a reason to use energy excessively. If Iceland accepted (what’s been reported as daily) proposals from firms asking to relocate, the nation would struggle to supply its population.
Also, there’s the issue of money leaving the economy. Firms and workers will benefit from Iceland’s climate and resources, at a cost to the Icelandic economy. Of course, they will pay some of that cost back in the form of rent, wages and corporation tax, but how much of the money will actually be put back into the Icelandic economy? A lot of it will ‘slip out’ and go back to the firm’s country of origin.
Finally, such is their volatile nature, an Iceland cryptocurrency mining Armageddon could be disastrous to the economy. Although unemployment rates are impressively low, a crypto crash would cause an almost-instant exodus of most mining firms – something that would undoubtedly hinder the economy in the short term. Many of the immigrating firms that have set up base in Iceland have been accepted based on an assumption of the future success of cryptos. It’s somewhat of a gamble on Iceland’s part, as if cryptos aren’t successful in the long term, it could feel the consequences of heavily backing the wrong horse.
Overall though, cryptocurrencies and Iceland have benefit from one another. If nothing else, it’s given the quiet yet scenic country some exposure on a global scale. Although exact value is debated, it seems the influx in mining firms would have boosted the economy as well.
As for Iceland cryptocurrency mines, they get to work to their heart’s content at a fraction of the cost were they to operate in their home countries. Will it continue? Can Iceland sustain the required energy output? At what point in the future does the smaller Bitcoin reward and increased mining difficulty make it not worth a company’s while? Although you never can be too sure with markets like these, presumably there’s a few years left to go. So for the moment, Iceland remains an absolute goldmine for cryptocurrency.
In terms of trading, the reason these cryptos are so popularly traded is the uncertainty that surrounds them. Their susceptibility to financial news and speculation often leads to price fluctuations, meaning they’re more exciting to trade. That’s why so many trading firms offer a range of cryptocurrency information, as well as crypto markets to trade on.
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