Bitcoin mining started as a promising practice and billion dollar industry. Easy automated money led to many developers and programmers to focus solely on this activity as it produced a great financial reward. Mining has slowed as Bitcoin became more expensive to mine, as was intended, and controversies have emerged.
First, there is the environmental issue that crypto mining consumes massive amounts of electricity and has begun to damage the environment. This has lead miners to setup in countries or States that subsidize electricity, putting the burden on taxpayers. And, considering mining often doesn’t generate tax revenue, this is not a fair deal.
Because of the high cost of electricity, the expensive equipment needed to mine Bitcoin, and the falling returns, many have stopped. Bitcoin’s value has dropped substantially since its inception and mining has become harder and harder as its limit of 21 million token approaches.
- Recent data suggests that GPU supply might be stabilizing and prices falling. GPUs, or video cards by Nvida are the primary tech behind mining farms.
Even as Bitcoin mining has had its ups and downs, one country has managed to take advantage of the situation.
Bitcoin mining has become an activity that takes place globally, making this task something that is already common for many people and companies in almost all countries. Iceland has worked hard to cash in on the gold rush.
Why Iceland? The hundreds of computers mounted in racks that are lit all day generate a considerable amount of heat. This heat impairs their performance, so the better they’re refrigerated, the better they will work. Therefore, a place with a cold climate can accelerate this cooling with a simple exchange of air from outside to inside.
Bitcoin mining operations use this energy for computer centers and cooling systems of machines and data. At this moment, there are several centers in different regions of the island. One of them is Keflavik, a town in which the international airport of Reykjavik, the capital city, is located.
For example, see: First Bitcoin Mining Conference Hashes Over the High Cost of Energy
Next, a business friendly jurisdiction that allows miners to use offshore companies and wallets to receive the mined coins is key to the tax picture. Bottom line, miners are operating nearly tax free in Iceland.
The cryptocurrency and Bitcoin mining industry in Iceland had a boost recently thanks to the launch of the Moonlite Project. This is a large data center in which several cryptocurrencies, including Bitcoin are mined.
Iceland is a country of only 340,000 residents, and all the electric power used in the country is renewable. This is a big deal considering Bitcoin miners will consume about 100 Megawatts by the end of 2018.
In comparison, all households in the country use only 700 gigawatt per year. There is no doubt that this is a great environmental impact for the tiny country, but you can’t exclude the amount of capital that has been invested into the country. Still, you can’t ignore that it’s a growing problem.
If Bitcoin or cryptocurrency mining reaches consumption levels that exceed the consumption of households in that country, it would be a problem, since Iceland would not have enough energy available for all of them. Which means that at some point the government will need create laws to kick out or moderate the miners. There have already been some talks to start this.
For example, the government is planning to eliminate tax loopholes and tax all mined coins as capital gains in the country. This is going to be difficult to enforce, but could be done using averages and other techniques.
However, as the price of Bitcoin has plummeted in recent months, the market might take care of Iceland’s problem. However, Iceland is and will remain an ideal country to mine Bitcoin and cryptocurrency so a solution to fix the energy problem is vital. Many of the existing “mines” might simply move to lesser known coins.
And tech firms are betting on mining hardware. For example, Tech Giant GMO to Roll Out World’s First 7nm Bitcoin Miner
Mining is helping Iceland lead the way in what is sure to become a massive phenomenon in the upcoming years. We will have to wait and see how the government of Iceland reacts to the situation they are currently living in.
I hope you’ve found this article on Iceland and cryptocurrency mining to be helpful. For more information, or for assistance in starting a business offshore, please contact us below by filling out the form. Thank you.
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