Iceland is the number one hash rate producer per capita globally. This tiny island has attracted bitcoin miners on a large scale facilitated by its natural resources and the government. Crypto mining is dictated by three significant factors, including power costs, hardware specs, and cooling requirements. Iceland provides affordable power costs and cooling methodologies, leaving you to only worry about hardware specs which are a universal need. 

The bitcoin mining industry in Iceland is estimated to consume around 120MW, equal to 1.3% Icelandic portion of the global hashrate production. With a population of only 370,000, Iceland has become the largest hashrate producer per capita. The Icelandic mining industry is operated by local firms, including Greenblocks, Borealis Data Center, and Advania Data Centers. Several international miners include Startmining, Hive Blockchain, Bitfury, and Genesis Mining.

The country is favored by its location, the Northern tip of the Mid-Atlantic Ridge, unlimited water supply, and countless active volcanoes. Here are the main propellers of the world’s most bitcoin-mining-dense country mining industry:

Low power cost

Iceland is the wealthiest country in electricity production per capita, generating close to double the amount as Norway, the second-largest per capita electricity producer. 

Iceland power source

100% of Iceland’s energy is from renewable sources, harvested through an intricate electricity stem exploiting various geothermal and hydroelectric power plants. Hydroelectric accounts for 69% of the total power produced, while geothermal accounts for 31%. Iceland and Norway are the only countries that use 100% renewable energy. 

Although El Salvador may have carried the day due to its colossal volcano mining project, Iceland has been silently running volcano mining at a large scale.

Cheap electricity by comparison

Iceland has a high power production and a low population making electricity quite affordable in the country. The all-in electricity tariffs from Landsvirkjun, the national power company, have retailed between $51 and $71 per MWh in the last five years. In 2022 alone, the tariffs stayed at an average of $63 per MWh, thus accommodating new-generation mining machines at a considerable margin, with the Antminer S19j Pro revenue per MWh at %116.

Although miners can find more affordable electricity in other Nordic countries, Iceland is a better option since it’s isolated from the rest of the world. The country’s geographical position protects it from global electricity prices and fuel inflation since all its power comes from renewable sources. 

Electricity cost in Iceland is also affordable because the largest electricity producer, Landsvirkjun, is state-owned and owns the most significant bit of the national grid. Through long-term, fixed-rate contracts, the state utility and two private electricity producers supply power directly to power-intensive firms like bitcoin miners and aluminum smelters. 

Electricity is becoming scarce in Iceland

Although Iceland has a high per capita power production, the cost is pricer than other Nordic countries such as Norway and Sweden due to high electricity demands in Iceland, such as aluminum smelters. The demand increase has also gradually made electricity scarce over the past few years. Additionally, there has been no construction of new power plants maintaining the supply at a constant as the demand increases. 

The low supply has made it almost impossible for new data centers to get power. The low supply might be a long-term problem as there are no solid plans to increase the number of power plants. The scarcity translates to limited growth room for bitcoin mining unless power-intensive companies exit the country.

Although the supply is low, the cost might remain constant because the marginal production cost of geothermal and hydropower has minimal margins. 

Perfect climate conditions for mining

Iceland’s mountainous geography, volcanic geology, cool temperatures, and wet climate are perfect for bitcoin mining. Besides affordable power, affordable cooling mechanisms are a huge determinant of the success of a mining firm. A few countries, as well as Iceland, have natural resources that can accommodate bitcoin mining. 

The country’s cold climate provides the perfect cooling to mining machines which produce a lot of heat. Iceland’s capital Reykjavik average monthly temperatures range from 1 degree Celsius (°C) to 12 degrees Celsius (°C), i.e., +34°F – +53°F. 

The low temperatures make running and maintaining a mining firm cheaper and less complicated than in hotter climates where the firm needs to invest in elaborate cooling mechanisms for an extra cost. Suppose the weather does not cool the machines effectively. In that case, miners can exploit the country’s endless water supply to employ cheap hydro-cooling setups maintaining the cost of production at meager rates. 

Political stability

Miners in different locations have faced regulatory and political opposition through mining bans, moratoriums, and high electric taxes. However, Iceland, one of the most stable and safest countries in the world, has offered a haven for miners for almost ten years without scuffles with the environment. 

Other miner-friendly countries such as Sweden and Norway have increased their electricity taxes to control the mining industry and save electricity for the authorities deem more resourceful industries. 

Limitations to bitcoin mining in Iceland

Although the Icelandic bitcoin industry is thriving, new miners have several limitations. Due to the looming power scarcity, getting energy permits for new data centers has become more challenging.  

Landsvirkjun has portioned power supply to specific high-power consuming companies such as bitcoin mining. The electricity provider mentioned low hydro-reservoir levels, few power plants, and getting electricity from third-party companies as the biggest hindrances in power supply. 

Conclusion

Thanks to its natural resources and political stability, Iceland has contributed to more than 1% of the global Bitcoin hashrate. The country’s geographical location has shelled it from the evergrowing energy and fuel price inflation experienced in continental Europe, making the island a haven for bitcoin miners. However, the future is unclear as the power supply remains constant with increasing demand – leading to difficulties in establishing new mining sites. The only saving grace for Iceland’s mining industry is that the government is unlikely to disrupt it because it is a significant power consumer and a leading income generator.