Cryptocurrency mining 

Binance Academy defines cryptocurrency mining (in a Proof-of-Work system), as the process in which transactions between users are verified and added into the blockchain public ledger. The process of mining is also responsible for introducing new coins into the existing circulating supply and is one of the key elements that allows cryptocurrencies to work as a peer-to-peer decentalised network, without the need for a third party central authority.

A miner is a node in the network that collects transactions and organises them into blocks, called the "blockchain". Nodes then maintain records of those blocks so that they can be verified into the future. The miner's job is also to ensure that transactions are valid when a new block is added to the blockchain.

Bitcoin is the most popular and well-established example of mineable cryptocurrency. Bitcoin mining is based on a consensus algorithm called Proof-of-Work (PoW). In PoW, the protocol sets out conditions for what makes a block valid, which is vital to the security of cryptocurrencies. In PoW, miners solve cryptographically hard complex puzzles by using their computational resources. On the other hand, a Proof-of-Stake (PoS) make the consensus mechanism completely virtual and there are validators instead of miners. A Proof-of-Authority (PoA) is a modified form of PoS, where transactions and blocks are validated by approved accounts (validators). 

Unlike the PoW and PoS, the PoA mechanism requires almost no computing power since it requires only a limited number of actor, the network can update the blockchain more frequently and is low in energy consumption. The EBSI is supporting the objectives of the European Green Deal by using the Proof-of-Authority consensus mechanism! 

You can read more about these concepts in our Third Edition Newsflash. 

Bitcoin mining in Iceland 

Iceland has a small population of around 340 000 inhabitants. Nearly 100% of energy in Iceland comes from renewable sources which allows for inexpensive rates. Its climate acts as natural coolant for these machines, which are usually in warehouses known as mining farms. A mining farm is a location, usually a large space, housing several computers dedicated to mining cryptocurrencies.  

In recent years, Iceland faced an "exponential" rise in Bitcoin mining that is likely to exceed that of all Iceland's homes. According to Mr Sigurbergsson, a spokesman for an Icelandic energy firm, Bitcoin mining uses around 840 gigawatt hours of electricity to supply data centre computers and cooling systems, while the homes use around 700 gigawatt hours a year. 

With its green energy at inexpensive rates, Iceland became a bitcoin miner's haven. In 2016, data centres accounted for nearly 1% of Iceland's GDP, with cryptocurrency mining operations making up 90% of those.