In Iceland, the act of ‘mining’ Bitcoin and other cryptocurrencies will soon require more electricity than its entire population needs to power its homes.
It’s an astonishing statistic and one that highlights the gold rush that’s taking place around cryptocurrencies.
With a finite amount of cryptocurrency in the world to be ‘mined’, Iceland has become something of a nirvana for a wave of companies that have sprung up and are looking to make as much money as they can before cryptocurrencies reach their set limits.
Thanks to its cold climate (perfect for naturally cooling large computer servers) and abundant supply of renewable energy Iceland is perfect for running huge buildings filled with computers.
By the end of this year, mining cryptocurrencies in Iceland will require upwards of 100MW, more than the electricity needed to power the homes of Iceland’s 340,000 residents.
While this is great for the companies who have moved in, it’s not exactly a long-term solution.
Every cryptocurrency has to be ‘mined’ or created by asking computers to perform incredibly complex mathematical equations. After a certain amount of time a coin is then produced and handed to the owner of the computers.
The only problem with this is that there are a finite supply of cryptocurrencies in the world. Bitcoin is limited to 21 million coins, and we’re now just 4 million away from reaching its limit. After that, no more Bitcoin can be ‘mined’.
Some are understandably worried about this limit, including the legislator for Iceland’s Pirate Party Smari McCarthy.
“We are spending tens or maybe hundreds of megawatts on producing something that has no tangible existence and no real use for humans outside the realm of financial speculation,” he told the Associated Press. “That can’t be good.”
Cryptocurrencies like Bitcoin are in essence a series of virtual ‘tokens’ that can be exchanged just like normal money except all the transactions take place over the internet.
Unlike normal money, Bitcoin isn’t regulated by any one country, or stored in banks. Instead it follows a shared set of rules that every owner must agree to.
Finally, every cryptocurrency shares a similar technology called Blockchain. This is in effect a giant database that holds the historical transactions for every Bitcoin or cryptocurrency in existence. It isn’t stored on a single computer or within a single building, rather every miner of Bitcoin has these records stored on their computer.
Think of it as a giant trail of breadcrumbs that allow you to trace each Bitcoin right back to the moment of its creation.