Crypto Miners in Iceland Turn to Farms in Search of Cheaper Energy

Cryptocurrency miners in Iceland are teaming up with farmers to solve electricity consumption issues and make mining greener and more sustainable.

Iceland has always been famous for its spectacular nature, but the tiny island country with cheap electricity has now become known as a magnet for companies and crypto miners. To address the problem of ever-growing electricity demand from energy-hungry cryptocurrency servers, Krista Hannesdóttir, a mathematics teacher in Iceland, has come up with a solution that should make mining greener and benefit the country’s farmers at the same time, Wired reports.

The current situation

There are over 2,000 digital coins issued by startups and cryptocurrency projects. They are traded on decentralized platforms where each transaction needs to be verified. The process is performed by a network of computers that do complicated mathematical calculations and consume an immense amount of electricity. People who use their computing power to serve the network get rewards in the form of new coins, with the process known as mining.

In its boom days,  crypto mining was a very profitable business, but as the value of digital assets dropped, the proceeds fell significantly. Miners were forced to look for a way to improve efficiency, so places like Russia’s Siberia, the Swiss Alps, and Iceland caught their eye.

The attraction of Iceland

A combination of geographical and economic factors makes this North Atlantic island nation an ideal place for cryptocurrency mining.

Iceland has a well-developed infrastructure for generating hydropower energy. The country produces about 80% of its energy in hydroelectric power stations, which is impressive by global standards – in the US, for example, only 6% comes from renewable sources.

“The economics of bitcoin mining mean that most miners need access to reliable and very cheap power on the order of 2 or 3 cents per kilowatt-hour. As a result, a lot are located near sources of hydropower, where it’s cheap,” Sam Hartnett from energy research and consulting group Rocky Mountain Institute explained in an interview with The Washington Post.

Moreover, cold Arctic air provides natural cooling for mining equipment and reduces the need to invest in air-conditioning systems, which are vital for the normal operation of data mining centers.

These conditions attract a lot of foreign companies, as a result of which many experts have expressed concerns about the environmental sustainability of the mining phenomenon.

The implications for Iceland

Bitcoin and altcoins are reshaping the economy of the country, providing an additional source of revenue and creating various job opportunities for the locals. Iceland, mostly known for its tourist amenities and low-budget airlines, is turning into a tech hub, its cities bustling with blockchain specialists and cryptocurrency technicians.

However, there is a flipside to this positive momentum. Apart from rocketing electricity prices, it puts the power generation industry under strain. The country may just run out of electricity if demand continues to grow at the current pace.

The energy consumed by cryptocurrency mining operations exceeds the electricity needs of Austria and Chile, according to recent estimates by Digiconomist.

Electricity demand for mining is growing so fast that it may exceed private energy consumption in the country. Experts are concerned Iceland won't be able to produce enough energy to meet the needs of both households and foreign companies deploying data mining centers in the country.

The possible solution

Hannesdóttir, who has a small mining farm, has come up with a simple yet clever idea how to remain profitable and reduce both the environmental and financial impact of mining operations.

She pays local farmers for their excess geothermal energy and converts it to electricity for her mining rigs. At the same time, the heat produced by the mining equipment can be used for other purposes, for example, heating stables and storage spaces. This creates a mutually beneficial situation for all parties involved.

“Farmers have a lot of storage space, so it’s easier for us to move our equipment to their location. You can also heat up the storage space, which is quite clean. So generally speaking, it’s reducing rent, and reducing energy cost,” Hannesdóttir explains.

While the idea seems mutually beneficial, not all farmers with geothermal energy across Iceland are happy with the idea of having strange and noisy mining rigs installed on their premises. It takes time and effort to convince them to participate in this venture since a lot of people still have no idea what cryptocurrency mining is and how it works.

 “We really had to explain what it was, that it’s a machine that makes money and uses energy. People are wary, obviously, because it sounds too good to be true. But in reality it’s really beneficial for us to get energy and space at a lower cost,” says Hannesdóttir.