- The Norwegian government has voted to end the subsidy on bitcoin mining
- This makes the cost of mining over 40 times higher
One of the most challenging aspects of cryptocurrency is the process of mining coins, specifically the energy requirements.
Many people who want to get bitcoin particularly find themselves having to expend enormous amounts of energy to do so.
It has even happened that people have been caught stealing energy in order to mine cryptocurrency and companies are forced to move operators to locations with lower energy costs.
One place where the cost of mining bitcoin is about to get much more expensive is Norway as the country has voted to end the previously adopted subsidy on bitcoin mining.
In the past, bitcoin miners enjoyed subsidized energy rates and only paid 0.48 øre ($0.05) per kilowatt.
Now, an altered national budget and a vote in parliament mean that they will have to pay 16.58 øre per kilowatt from January 2019, which is a significant increase in cost.
Previously, miners could mine a single bitcoin at the rate of $7,700 per coin. This price is set to increase tremendously.
One of the reasons for this is some members of government not supporting the idea of mining cryptocurrency as a profitable endeavor.
Lars Haltbrekken, a member of the Norwegian parliament, said,
“Norway can not continue to provide huge tax incentives for the most dirty form of cryptocurrency output […] [Bitcoin] requires a lot of energy and generates large greenhouse gas emissions globally.”
This decision has not come without some pushback and criticism, particularly from local industry group ICT, with ICT economist Roger Schjerva saying,
“This is shocking! [To change] 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 playing a gambling role with its credibility.”
This new hike in the cost of mining is sure to have an effect throughout the industry.
Firstly, there will likely be a significant decline in the number of miners, particularly smaller, private miners who do not have the resources to cope with the price hike.
There is also the issue of large-scale mining corporations who might choose to move operations to more favorable countries.
Any country-wide regulation that negatively impacts the blockchain industry risks driving away business to other countries as evidenced by India, which has seen large firms such as Zebpay move operations to Malta, a move favorable country.