Bitcoin miners around the world have been wrestling with a huge cryptocurrency sell-off that has wiped 30% from bitcoin’s value in seven days, and now Norway’s bitcoin miners are facing a further blow after the country’s government moved to end electricity subsidies for bitcoin and crypto miners.
From January of 2019 bitcoin miners in Norway will have to pay normal electricity tax in the country, after their discount was removed in the state budget agreement, local media has today reported.
The removal of electricity subsidies for bitcoin miners in Norway will add further pressure on to the burgeoning industry, which has seen its profits heavily hit by the recent bitcoin and cryptocurrency rout and resulted in reports of many smaller bitcoin miners around the world switching off their machines.
The average cost of bitcoin mining in Norway is $7,700 per coin, according to research from Germany-based bitcoin miner Northern Bitcoin, which has operations in Norway. It claims to be able to mine bitcoin (and other cryptocurrencies) at a discount through use of cheap renewable energy and fjord-based cooling systems.
“Norway can not continue to provide huge tax incentives for the most dirty form of cryptographic output as bitcoin. It requires a lot of energy and generates large greenhouse gas emissions globally,” Norwegian parliamentary representative Lars Haltbrekken said recently, it was reported by Norwegian newspaper Aftenposten.
Bitcoin miners and data centers in Norway currently enjoy the same discount as other power-intensive industries, meaning those with a capacity of more than 0.5 megawatts pay 0.48 øre ($0.05) per kilowatt. This will rise to 16.58 øre per kilowatt from January.
Northern Bitcoin, which uses the Lefdal mine in Norway’s Sandane to house its bitcoin mining rigs, found China has the lowest average bitcoin mining cost at $3,100, along with Saudi Arabia. In Canada, the average cost of bitcoin mining is almost $4,000. At the other end of the scale, bitcoin mining can cost almost $10,000 per bitcoin in Australia.
Norway’s tech sector has reacted angrily to the government’s electricity subsidies changes, calling on the government to support the industry.
“This is shocking,” said Roger Schjerva, chief economist of tech industry body ICT Norway. “Budgets have changed framework conditions without discussion, consultation or dialogue with the industry. Norway scores high on rankings of political stability and predictable framework conditions, but now the government is gambling with this credibility.”
Others in the world of crypto and blockchain have welcomed the removal of subsidies, however.
“This is a win for the Norwegian people and our natural resources,” said Jon Ramvi, chief executive of Oslo-based blockchain advisory group Blockchangers. “Less mining in Norway will reduce the prices of electricity for companies and people residing in Norway meaning that we reap the benefits of these resources locally instead of giving it away to Bitcoin miners.
“More miners in the Bitcoin network does not make it faster or scale better. The only function of more miners is securing the network further. It means that if you want to hack the network, you will need to have more computational power than the other machines in the network. However, the Bitcoin network has been extremely secure for over a year now so there should be no need for more miners.”