Iceland is the most isolated country in the world. We are talking about an island in the
middle of the Atlantic Ocean that is populated by a little over 350,000 inhabitants. In other
words, any New York neighborhood has more inhabitants.
The closest capital city to Iceland is Oslo, in Norway, and it is over 1,500 miles, that’s
2,500 kilometers away.
However, Iceland is one of the richest countries in the world... and it could become the international
capital of a very modern industry: cryptocurrencies. So could Iceland become the Hong Kong of cryptocurrencies?
(Iceland, a paradise for cryptocurrency miners. InfoBae)
But how is it possible that such a remote country can be so important for cryptocurrencies?
In this video we are going to tell you. Iceland is one of the most unusual countries
in the world. A place where more than half of its inhabitants believe in the existence
of elves. At the same time, it is one of the most advanced and modern economies on the
planet.
No matter which metric you look at, Iceland is one of those countries that is always at
the top of the rankings. Icelanders are richer than Americans or Danes. They are also the
eighth most equal country in the world in terms of income. And they are the undisputed
leaders in renewable energy. Basically, they are the only country on earth that can boast
that 100% of its energy is completely green.
And I know what many of you are thinking! Iceland? But isn't it the country that suffered
the most from the great financial crisis of 2008? Exactly! When we think of Iceland, we
think of a country that declared bankruptcy after the financial crisis.
However, in just 13 years they have recovered everything that they lost. So how did they
do it? We will deal with this topic in other videos. But we can sum it up in three words:
tourism, natural resources and... Cryptocurrencies! Listen up.
(How Iceland became the bitcoin miners' paradise. The Guardian 13 February 2018)
It is almost impossible to make an exact calculation of how much BitCoin – or how many cryptocurrencies
– are mined in Iceland. But it is estimated that this industry accounts for almost 1%
of this country's entire GDP. By some estimates, Iceland mines 8% of all bitcoin in use today.
I repeat: these are all estimates because no one has exact information. What we can
say is that Iceland is becoming increasingly important within the crypto world. And it
has a number of advantages that could make it the Hong Kong of crypto.
The question is to what extent is it good for an entire country to depend on bitcoin?
What environmental impact could bitcoin have in Iceland? What are the advantages that bitcoin
miners in Iceland have? Today we are going to answer these questions but first, let's
look at a bit of history.
(A VERY HOT MARKET... FOR THE ENTIRE PLANET)
I’m sure many of you have heard that bitcoin miners generate a lot of CO2 emissions, right?
And some of you may be wondering why?, what does bitcoin have to do with pollution, and
what the heck is a bitcoin miner? Some of you may already know. But others will probably
not be so clear. So, before we go on, let's break it down.
Let's imagine that I send 100 euros to a friend. Someone has to be in charge of VERIFYING this
transaction. That is to say, to make sure that I have 100 euros less in my bank account
and that there are 100 euros more in my friend's account.
So who takes care of authenticating these transactions? Well, in the current financial
system, banks do it. However, banks do not exist in the crypto world. So who verifies
the transactions? This is where the miner comes in!
No! We're not talking about that kind of miner. Actually, we are talking about this.
You see: the main feature of cryptocurrencies is that all users keep a copy of the same
ledger. All the transactions that have been made in that cryptocurrency throughout history
are stored in that ledger. In other words, technically, any BitCoin user could be a miner.
So how do you choose who will be in charge of verifying the transaction? Well, you could
say that there is a bit of a contest! The Bitcoin system creates a very complicated
equation (the so-called "proof of work") and the first user to solve it is the one in charge
of verifying the transaction.
And what does that person receive in return? Well, two things: on the one hand, the miner
is paid a commission for the transaction. On the other hand, he is paid with newly created
bitcoins. As you know, the idea behind bitcoin is that only 21 million bitcoins will be created.
So, those bitcoins are created as miners are paid. And that's why they are called miners.
And yes, I know this is a very simple explanation and we have left a lot of things out. But
this is the basic concept you need to understand to continue with the story.
As you can imagine, this equation is not solved manually. That is, do not imagine a very smart
girl trying to solve an equation with a pen and paper. Actually, we are talking about
problems solved by computers.
The more powerful the computer, the faster it can solve it. As you can imagine, this
has led to a mad race to see who has the most powerful computer. To give you an idea, THIS
is what a bitcoin mining center looks like these days.
What you are looking at are hundreds of processors and graphics cards put together under one
roof to create a supercomputer. Super computers that can be up to 800 times faster than a
normal computer. And this is where the environmental issue comes in.
Because, as you can imagine, these supercomputers consume a lot of energy. But not only that,
what happens if you have hundreds of these such processors working at full capacity 24
hours a day? They get hot! And as you know, a computer has to be kept cool.
So you can imagine how much all these bitcoin mining centers spend on air conditioning.
In other words: if you want to mine bitcoin, you’d better get out your wallet... because
the electricity bill is not cheap. Take a look at this graph.
That’s right. According to an estimate by the University of Cambridge, mining Bitcoin
consumes more energy than a country like Argentina. But wait because that is not the worst thing!
Where are almost all Bitcoin miners located? Well, many of them are in Northern China:
in fact, it is estimated that up to 75% of the Bitcoin in the world is mined in that
country, for two main reasons: cheap land and cheap energy, but where does China’s
energy come from?
Well, from coal, which, as you know, is the most polluting energy. All this explains news
stories like this.
(Bitcoin's environmental footprint threatens the future of the currency - El Economista
29 May 2021)
Do you understand now where the problem lies? Well, pay attention. Because where there is
a problem, there is a solution. And this is where the Icelandic factor comes in.
(THE LAND OF CHEAP ENERGY)
Yes. In Iceland, the marginal cost of producing electricity is practically free. But not only
that! 100% of the energy consumed in Iceland is green. You don’t believe me? Then check
out this piece of news.
(Iceland offers unique conditions in the world to produce cryptocurrencies, due to its geothermal
energy, which is very cheap and 100% renewable). Sur
And I know what you are wondering, what kind of black magic is this? What has Iceland done
to have green and very cheap energy? Well here comes the big advantage of living in
the middle of the Atlantic. Iceland is right on the fault line that separates the Eurasian
tectonic plate from the North American tectonic plate.
That’s right! There is a place in Iceland where you can jump and say "now I'm in Eurasia",
"now I'm in North America". And all this has a consequence: Iceland is a volcanic island
with enormous geothermal activity.
Iceland is the country of geysers, hot springs and volcanoes with unpronounceable names.
All this not only translates into the perfect place for tourism. We are also talking about
natural and renewable energy sources.
But it doesn’t end there! Another thing that characterizes Iceland is... the cold.
The average annual temperature is around 5 degrees. This creates a lot of problems but...
Surprise! It's a huge advantage if you want to cool big servers... or large bitcoin centers.
In other words, it was only a matter of time before we would find news stories like this.
(Iceland is a land of volcanoes, geysers and now also bitcoins. Swissinfo)
For example, Genesis Mining. Genesis Mining is one of the most important mining companies
in the world today. In 2016 they installed a cryptocurrency mining plant called Enigma.
They mine bitcoin, ethereum and other cryptos 24 hours a day, 365 days a year.
But they are not the only ones! It is becoming more and more common to find news stories
like this.
(Minersgarden launches new farm in Iceland for cloud mining of BTC and ETH. Globenewswire)
The benefits and profitability of mining in this country has been discovered by different
companies looking for their share of the pie, but remember I mentioned the huge demand for
electricity from these miners? Could this pose a problem for Iceland? Well, take a look
at the following:
(Bitcoin energy use in Iceland set to overtake homes, says local firm. BBC)
That's right, the energy used by these companies in Iceland is said to already exceed that
used by all households. And you may ask, so what's the problem? After all, energy in Iceland
doesn't pollute, so what's the problem? Wouldn't it be great if all the bitcoin miners moved
to Iceland? Well let's take a look at the other side of that coin right now.
(THE HONG KONG OF CRYPTOCURRENCIES?)
This is not the first time Iceland has had a powerful financial industry. The last time
they occupied the financial newspapers, they ended up bankrupt. We will tell you more about
this saga, in depth in an upcoming video.
The question is, how did they get out of the crisis? And the answer is by finding new economic
sectors to bet on. The first and most significant is tourism. Take a look at this graph.
To give you an idea, in 2014, Iceland was already attracting more than one million tourists
a year. This is more than three times its local population. Since 2011, tourism accounts
for one out of every two new jobs created in the country. Another key sector is fishing
and aluminum mining.
But, since 2016, there is another even more promising sector.
(According to the Icelandic Blockchain Foundation, 8% of all Bitcoins have been mined there.
Using geothermal and hydroelectric power. DW)
Although it is impossible to calculate how much bitcoin is mined in the world, there
are estimates that 8% of the bitcoin being mined right now comes from Iceland. The government
has welcomed these companies with open arms. And it makes sense that they should.
A KPMG report states that in 2016, before the current boom really took hold, the data
center sector had already contributed close to 1% to the country's GDP. This was in 2016.
At the time of making this video it’s likely that it’s a hell of a lot more.
And I know what many of you are thinking. Those of you who are veteran followers of
VisualPolitik can already guess what the problem is – and those of you who are not veteran
followers of VisualPolitik, you can subscribe to this channel and hit the little bell so
you don't miss any of our updates.
Many of you will think that the problem with Bitcoin in Iceland is that they will end up
becoming dependent on a single industry, right? Well, the truth is that they won't! For the
time being, Iceland still has a very diversified economy.
And it's hard to imagine that bitcoin is going to change that. Think about it: most bitcoin
mining companies employ hardly anyone. In other words: they generate a lot of money
for the country but most of the people work in other sectors.
So where is the problem? Well, take a look at this graph.
Here you can see Iceland's energy consumption. Since 2009, it has started to increase like
crazy. But why? In theory, the first rise is explained by aluminum mining. Aluminum
was one of the first industries that helped this country out of the crisis.
And that industry consumes a lot of energy. However, from 2016 onwards, energy consumption
starts to rise yet again. Because it is around this time that bitcoin miners begin to settle
in the country.
That is, with the arrival of new Bitcoin startups, demand has skyrocketed and the following is
happening:
(Nordic region, Bitcoin's green haven, is running out of surplus electricity. Business-standard)
That's right, aluminum plus the advent of Bitcoin mining is putting this country's supply
of green energy on the ropes. And you may ask, have cryptocurrencies really increased
energy demand that much? Take a look at this graph.
Here you can see how every year, the energy consumption of servers and data centers grows
by 50% year after year. And yes, bitcoin miners are included in the category of data centers.
Put another way: bitcoin's energy consumption is about to exceed Iceland's energy production.
All this means that, sooner or later, this country will have to increase its power generation.
And the question is, can they produce even more green energy?
The answer is yes. Not only can they get even more out of geothermal energy. Iceland is
also starting to build windmills. You see, until a few years ago, Iceland struggled to
install wind power. And why, you may ask? Well, because there were no windmills that
could withstand the gales that occur on this island. Now there is technology that makes
it possible to build wind farms in Iceland.
In other words... The problem is not environmental. Nor is it the lack of diversification... So
where, you may ask... is the problem? [Name of Host], please put us out of our misery...
Tell us now!
Well, the problem is... What if one day cryptocurrencies stopped being so profitable? Think of it this
way: in recent years, both Bitcoin and Ethereum have grown to amazing highs.
That has prompted a lot of entrepreneurs to jump in and set up their crypto mining centers.
Now Iceland needs to build more power generators. But... What if one day the crypto rush were
to pass? What would happen to all that installed power?
Side note: I know many of you think cryptocurrencies are here to stay. But let's be honest: none
of us know what's going to happen in the future. And it is very reasonable to suppose that,
even if bitcoin is still around in 20 years, it will no longer be as profitable as it is
now.
Everyone can have their own opinion. But it is undeniable that it is a more than likely
possibility.
In that case... What would Iceland do with all the investment it has made?
Faced with this problem, there are two possible solutions. The first is for Iceland to consider
exporting green energy to other countries. It would be very expensive because they would
have to lay underwater cables, which are not cheap. But it could become a new revenue stream
for the country.
The second option is for the State not to pay for any of these windmills. That is, that
it is the bitcoin miners themselves who have to pay for their own energy sources. This
solution could be very attractive because it would allow as many bitcoin miners as needed
to be installed.
However, it could make Iceland less profitable for the crypto world. What’s more, other
Nordic countries like Norway could end up being a better option.
So now the question is over to you: what do you think Iceland should do? Do you think
it's a good thing for the Icelandic State to gamble on cryptocurrencies and build wind
farms paid for with public money? Or would it be better if those wind farms were privately
owned by bitcoin miners? In other words: bitcoin miners would manage the energy they use.
Will we see Iceland become the new Wall Street of crypto? Do you think Iceland is ready to
be a powerhouse in Bitcoin mining? Will they be able to meet the energy consumption needs?
You can leave me your answer in the comments. And as always, don't forget that here at VisualPolitik,
we release new videos every week so subscribe to the channel and hit the little bell so
you don't miss any of our updates. If you liked this video, LIKE it and see you in the
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