October 12, 2018

Iceland Fights Back, Opening the First Official Cryptocurrency Exchange

In many places around the world, a process called cryptocurrency mining has caused massive challenges, including but not limited to those related to energy consumption. One type of cryptocurrency, Bitcoin, has caused most of the challenges, with few countries facing problems as dramatic as those occurring in Iceland.

Bitcoin mining is a process in which people race to solve complex math problems to win cryptocurrency. The mines use computers to solve these complex math problems. As the value of Bitcoins has risen, so has the number of people fighting to mine them. This, in turn, increases participation in the Bitcoin network and its accompanying energy needs.

In fact, the energy needs of Iceland’s networks are now equivalent to those of the entire Republic of Ireland and are nearly as much as the energy needs of all of Iceland’s households, according to a Bloomberg.com article. And it’s likely to increase to 100 megawatts of power usage by the end of 2018.

Many Bitcoin networks are drawn to Iceland because of the volcanoes located there, which provide the country with an abundant source of cheap geothermal renewable energy. Using this lower-cost form of energy allows Bitcoin miners to reduce expenses and enjoy higher profits. Economically efficient power is especially important because as fewer Bitcoins are left to mine, each block becomes exponentially harder to solve, requiring more kilowatt-hours per coin. Also, because Iceland is located so far north, the Arctic air provides an inexpensive way to keep computer server rooms cool, even as they generate massive amounts of heat.

Until now, cryptocurrency exchanges have been decentralized and unregulated worldwide. Outside of Iceland, it remains that way today. But in September 2018, Iceland finally said enough is enough.

Iceland Responds

Given that so much of its energy resources are being used up through cryptocurrency interactions, it isn’t surprising that Iceland is the first country to create a regulatory body. The regulatory organization is called the Financial Supervisory Authority, and now all cryptocurrency firms must register with this organization.

Having said all this, as IcelandReview.com reports, Bitcoin electricity usage is not what prompted this new legislation. Instead, it was crafted in response to the need to “combat money laundering and terrorist activities.”

Iceland is more concerned with what will happen if and when Bitcoin goes away. What would become of all that cost sunk into infrastructure? The mines that cryptocurrency companies will potentially leave behind can have alternative uses to stimulate Iceland’s economy. They can function as data centers for solving complex problems, such as artificial intelligence and the processing of large amounts of data for autonomous vehicles.

Power and Energy Challenges Intertwined

The problem of how to address the power demands of these companies and their users still needs to resolved, as does the impact this may have on Iceland’s economy. According to Wired.co.uk, the security and quality manager of one data center in Iceland notes that the center receives multiple requests each week to be added to the network. But the center simply doesn’t have the capacity to make those additions.

In addition, bankers, regulators and politicians alike worry about the highly volatile financial situation associated with crypto coin values, according to the article. Also, The Icelandic Data Center Industry released a report in 2018 warning that the power consumption imbalance poses a “huge risk factor for local industry” in a market so vulnerable to disruption.

According to the report, “There are indications that the huge increase in demand from the crypto currency sector is based on very sharp rises in the currencies values, which has been described by many economists as speculative. The market outlook can thus best be described as fragile.”

Power Problem

In 2018, the Washington Post compared Iceland’s situation to a “21st-century gold-rush equivalent,” noting that some energy producers already fear they will not be able to keep up with rising demand if this situation continues. Concerns exist, the reporter states, that Iceland may even “have to slow down investments amid an increasingly stretched electricity generation capacity.”

Positive Thinking

The Washington Post article also notes a positive side in the midst of the concerns about sustainability: an added source of revenue in a country that mostly relies upon tourism.

Bloomberg, meanwhile, points out the optimism of power-plant experts in Iceland, who share a belief that Bitcoin mining won’t be there in the future, but that the data centers created for their use will remain. The centers would become new technology incubators that could be used for “deep learning applications for self-driving cars or automatic translators.”

Fast-Track Power Solutions

As the demand for power continues to increase in Iceland, and as volatile situations continue to play themselves out, it won’t be surprising if fast-track power solutions are needed to support Iceland’s ever-growing demand for energy.

APR Energy provides flexible power-generation solutions, fast-tracking them to help run industries and cities around the world. We are a global leader in creating turnkey power plants that provide reliable, cost-effective electricity when and where it’s needed. This includes the energy required for Bitcoin’s electricity usage.

If you’d like to discuss your own fast-track energy solutions, contact us online or call +1 (904) 223-2278 today.