Iceland will move away from mining to pure blockchain business, say local industry insiders who shared this opinion with the news website Red Herring.
Halldór Jörgensson, chairman of Reykjavik-based Borealis Data Center, said that the hype around mining was declining in the country. He added that there is a request from local crypto projects to move more towards pure business based on distributed ledger technology rather than in the direction of mining. Despite this, mining contributed to a rapid growth of local energy sector and data industry, and now their sufficiently developed infrastructure is expected to stimulate the growth of the blockchain-based business.
Before Iceland traditionally earned on tourism, service, aluminum production, and fishing. However, the country's economy needed to diversify away from these dominant industries. Iceland also faces a shortage of labor, so less labor-consuming types of industry are in great demand. The country became a magnet for miners when the latter discovered that it was very cold there. After all, what consumes the most energy spent on mining cryptocurrency? Cooling down the running equipment. The average annual temperature in Iceland is about 7° C, which saves on cooling systems. Also, electricity is much cheaper here than in other countries. The country itself is an energy generator, thanks to the volcanic nature of the island. Iceland uses geothermal energy, but there are still tidal and wind installations, hydroelectric power stations. All these factors led to an increase in the number of mining centers.
Nevertheless, the new industries are not all positive news, as they have already brought some difficulties. In December 2017 and January 2018, Iceland went through a ‘big bitcoin heist’, which has no analogues in scale. In fact, these were four unrelated thefts, during which 600 mining mines were stolen from Icelandic data centers for crypto mining. The total cost of equipment exceeded $2,000,000. In the hands of criminals there were 600 video cards, 100 power supplies, 100 motherboards, 100 processors and 100 hard disks.
In 2008, the country's banking system collapsed. Icelandic banks Glitnir, Landsbanki and Kaupthing attracted the money of European pension funds at high rates and poured cheap loans to the population. Icelanders speculated on borrowed funds on the local exchange dispersing prices by almost 1,000%. As a result, the volume of toxic assets accumulated by financial institutions was almost 10 times higher than the country's GDP. Against the background of the global financial crisis, the collapse of the credit bubble brought down the Icelandic economy and the exchange rate of the national currency. Mining may well become a serious source of income for Iceland. And if it serves as a springboard for technological projects, it will welcome a new stage in the country's economy.