There has been a tremendous transformation in the Bitcoin mining landscape since. Different countries have become the new harbors of miners. One European country has emerged as the world’s largest hash rate producer per capita. Owing to cheap electricity, Iceland is one of the first countries to see industrial-scale Bitcoin mining.
According to Bitcoin mining researcher Jaran Mellerud, the country’s entrepreneurial locals can also be attributed to the growth of the sector. The Icelandic bitcoin mining industry is estimated to consume nearly 120 MW, equating to a share of 1.3% of the global hash rate production. Considering the fact that Iceland has a population of only 370,000, it is the biggest hash rate producer per capita.
What Makes Iceland Special?
There are other countries where crypto miners can find more affordable electricity. In fact, electricity has historically been slightly more expensive in Iceland than in other Nordic locations such as northern Norway and northern Sweden. So what makes Iceland a lucrative location?
One crucial advantage, as pointed out by Mellerud, is the fact that the Artic nation’s electricity system is in total isolation from the rest of the world. This evidently protects the players against global electricity price inflation. To top that, there are no interconnections between Iceland and continental Europe, which prevents the former from being exposed to fuel prices since all of its electricity comes from renewable sources.
Miners have been operating in the region for nearly ten years without any significant issues with the regulatory watchdogs, potentially making it the most stable Bitcoin mining jurisdiction in the world.
“El Salvador may have gotten the most attention in the Bitcoin community from its volcano mining project, but the Icelanders have quietly been volcano mining at a much larger scale for several years.”
Second Line of Defense
Iceland’s electricity supply is becoming scarcer over the past few years. The development of new power plants also appears to have stagnated. As a result, electricity allocation for new data centers has become nearly impossible.
This can be fixed by building new power plants. But there are very limited plans for any such development. Iceland is powered by volcanoes and waterfalls, thereby making it the most electricity-rich country in the world. Hence, electricity is expected to remain cheap as hydro and geothermal have very low marginal costs of production.
Another line of defense that the miners in the tiny European country have against rising power prices is long-term fixed-price electricity contracts.