Published: Thu, February 15, 2018
Markets | By Rosalie Gross

First you get the bitcoin, then you get the power outages?

First you get the bitcoin, then you get the power outages?

Beyond its obsession with finance - Iceland was a center of the global derivatives meltdown in 2008, a catastrophe which saw some local bankers jailed - the tiny country of 340,000 people is drawing cryptocurrency companies because of its cheap energy.

Johann Snorri Sigurbergsson from Icelandic energy company HS Orka told BBC that there simply isn't enough energy to power newly-proposed data centers.

Bitcoin mining occurs when computers verify existing bitcoin transactions by solving complex mathematical problems, and then receive bitcoin as a reward.

Iceland has become one of the most attractive places for virtual currency mining companies to open shop given the island's abundance of renewable energy - geothermal and hydroelectric energy account for nearly 100% of Iceland's electricity production.

He added that he expects Bitcoin mining operations will use around 840 gigawatt hours of electricity to supply data centre computers and cooling systems, for example.

"I don't see it stopping quite yet", says Sigurbergsson.

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He estimated that the county's homes, in contrast, use around 700 gigawatt hours every year.

According to experts, there are no grounds to predict any decline of interest of foreign companies in establishing their data centres in Iceland. After China and Canada, Iceland is the following hot area for the huge companies invested into virtual currency mining. A lot of them are waiting for an opportunity to place their centres there though it is impossible to satisfy all their requests. "These companies are not doing that, and we might want to ask ourselves whether they should", Smari McCarthy, a member of Iceland's Pirate Party, said as quoted by the Associated Press.

"Under normal circumstances, companies that are creating value in Iceland pay a certain amount of tax to the government", McCarthy explained.

In December 2016, when Iceland was rallying to form an alternative coalition that included the Pirate Party after inconclusive election results, the Pirate Party's founder referred to their platform as the most "favourable" for Bitcoin's path to legality in the country.

The growth of Bitcoin since its inception has led to the need for more bitcoin mining and the demand for more data centers to do the mining.

Inorder to make bitcoins, one needs enormous amounts of energy to run their PCs and mine the bitcoins.

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