Reykjavik, Iceland – Marco Streng first visited Iceland to solve a simple problem. His bitcoin computers were using more energy and the remote North Atlantic island had massive amounts of electricity at inexpensive rates.
He travelled no more than three kilometres from the airport terminal to an abandoned airstrip built by allied forces in World War II.
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This was in 2014 and the barren, windswept ground then seemed like an unlikely place for a financial district.
The strip is now where international companies “mine” for bitcoins and other virtual currencies. Powerful computers, stacked inside long and grey warehouses, use more electricity than all Icelandic homes combined, according to a local energy firm.
“People don’t give me a funny look any more when I explain my plans,” Streng told Al Jazeera.
Raised in Bavaria, Germany, the 29 year old was a maths prodigy on a glowing academic track until he began collecting digital coins. Being a bitcoin entrepreneur is the only job Streng has ever held.
The new industry’s relatively sudden growth is raising serious concerns for its environmental impact.
Iceland’s energy comes from hydroelectric dams and geothermal power plants, creating electricity without carbon emissions.
But this “green” energy is not entirely environmentally friendly. Hydroelectric dams sink untouched land under water and alter rivers and waterfalls.
Geothermal power plants are built over natural hot spring areas, spoiling the unique landscape.
“Iceland still has one of the biggest wilderness areas in Europe,” said environmentalist Tomas Gudbjartsson, protesting the expansion of energy infrastructure. “We will simply destroy these areas if we continue.”
Energy demand has developed because of the soaring cost of producing and collecting virtual currencies.
Computers are used to make the complex calculations that verify a running ledger of all the transactions in virtual currencies around the world.
In return, the miners claim a fraction of a coin not yet in circulation.
In the case of bitcoin, a total of 21 million can be mined, with about 3.3 million left to create.
As more bitcoins enter circulation, more powerful computers are needed to keep up with the calculations – and that means more energy.
According to Dutch bitcoin analyst Alex de Vries, who operates a Bitcoin Energy Consumption Index on the website Digiconomist, bitcoin energy consumption is still on the rise globally, after receding late last year following a drop in value.
Earlier this month, authorities in China, where coal-rich regions host the world’s biggest cryptocurrency mining farms, announced plans to crack down on the industry completely, claiming massive energy waste and pollution.
The move is expected to load pressure on Iceland and other areas still welcoming the business.
“They are great customers,” said Johann Snorri Sigurbergsson, business development manager at the local energy firm HS Orka, as he praised the bitcoin farms for steady and stable energy usage. “The computers are just always on, always running on maximum capacity.”
HS Orka provides electricity to the southwestern Reykjanes peninsula where the cryptocurrency “farms” are largely based. Over the past year, the region’s energy supply has been nearly exhausted and HS Orka is expanding its capacity with a hydroelectric dam in the remote Tungufljot river, near the Great Geysir hot spring tourist attraction.
Streng compares cryptocurrencies with the early days of the internet – a phenomenon that is still evolving and will become more energy efficient.
“At the beginning, cryptocurrency mining was like panning gold from the river banks. Now the cryptocurrency industry has moved on to industrial mining,” Streng said.
But the best position to be in at any gold rush, as business schools often tell students, is to sell the shovels and let others take risks.
Genesis Mining, the company founded by Streng, is mostly financed by customers seeking to rent “hashing power” to collect bitcoins.
The investment is volatile. Bitcoin has lost half of its value of the past year, from around $8,500 in April last year to today’s value at about $4,000, according to tracking site Coindesk.
Fluctuating prices and high transaction costs make the virtual currency useless for day-to-day payment – although Streng, who addresses tech crowds around the world, disagrees; he insists he used bitcoin just last week to “pay for a nice hotel”.
Anonymity, experts say, is the only real advancement bitcoin has over other forms of payment. As a crypted currency it serves drug cartels, online scammers and other underground businesses.
But advocates like Streng have a different perspective, considering bitcoin’s lack of central authority the currency’s greatest strength.
“Take Venezuela. Their national currency is in hyperinflation. What is the alternative for people?” Streng said.
“Bitcoin offers people an alternative option to store value, free from the mainstream finances. That can be incredibly important in a lot of ways.”
Bitcoin is not creating jobs. Instead, the industry makes irreversible damages on waterfalls and wilderness. I am not willing to make that sacrifice and fortunately a lot of Icelanders agree.
When Streng was a student at the University of Munich, he left his room in the morning with a newly-bought mining computer turned on – solving maths formulas to mine the many millions of bitcoins available at that time – while attending maths classes himself.
Fellow students noticed his success and soon many dorm rooms had been turned into amateur cryptocurrency mines.
The frenzy lasted until the end of the month when the electric bill arrived: the total electric cost was split with everyone living in the building – including those who were not involved in the bitcoin enterprise.
Back in Reykjavik, the collective cost that society has to pay for the bitcoin enthusiasts is also at the heart of Gudbjartsson’s argument.
“Bitcoin is not creating jobs,” he said. “Instead, the industry makes irreversible damages on waterfalls and wilderness. I am not willing to make that sacrifice and fortunately a lot of Icelanders agree.”