Last December, as bitcoin reached its highest price, Advania, Iceland’s largest data center provider, struggled under the weight of demand from foreigners desperate to tap into the country’s unique, crypto-friendly metrics.
“We have seen a lot of cowboys,” one manager tells Red Herring: people who, “in our experience, are just identities that come and go.”
It was frenetic, if expected: Iceland, with 98% of its electricity grid coming from renewable geothermal energy, and a cold climate friendly to heat-prone ASICs, or bitcoin mining machines, can churn out crypto at more efficient rates than just about anywhere on earth.
Iceland power usage effectiveness – PUE – can be as low as 1.03, meaning that for every $100 invoiced, the real cost is $103. The European average is 1.78, which makes Iceland almost twice as cost-efficient as many of its continental neighbors.
Little wonder, then, that so many international mining firms, like BitFury and Genesis, entered Iceland’s domestic market, outspending local players, many of whom were bitcoin hobbyists, who took a particularly keen interest given the catastrophic effect of the 2008 financial crisis, during which over 60% was wiped from the value of the Icelandic currency, the krone.
That activity reached a peak in December. When bitcoin’s price plummeted – from $19,783 to $7,424 in April – many predicted a collapse of Iceland’s bitcoin industry.
Not so. While politicians have joined a crescendo of citizens concerned that the sector will exacerbate a potential second crisis, this year’s drop – underscored by the dramatic tale of a bitcoin mining heist in January – has allowed local providers to branch into other, blockchain-powered fields.
Halldór Jörgensson, chairman of Borealis Data Center outside the Keflavik International Airport that has brought so much air and tourist traffic to Iceland since the crash, says he barely picked up the phone towards the end of 2017, such was the phenomenal demand for space at his facility.
Politicians raised eyebrows at an industry they associated with Silk Road, Mt Gox and other scandals. Now though, Jörgensson says, things are very different.
“The demand is…shifting more towards the pure blockchain business,” he tells Red Herring. “So you could say that the bitcoin wave, the big wave of bitcoin demand, has helped us to build out really fast, because there were really aggressive or interested parties who wanted to do things and we managed to do the build-out.
“We strongly believe that when the whole bitcoin thing has settled down to some kind of a level that is not as crazy as it was a year ago,” he adds. “We believe there’s another wave that crops up that will utilize these infrastructures that have been built up during the bitcoin mining phase.”
The global blockchain market is set to reach a value of $2.3bn by 2021 according to Statista, an analyst. Iceland, a windswept island on the edge of the Arctic Circle, is crammed full of wonders like glaciers, black-sanded beaches and waterfalls. For its crypto entrepreneurs, their nation has discovered a 21st century mineral wealth like no other.