These photos show you inside an Icelandic bitcoin mine

Jun 14, 2016

This article is published in collaboration with Business Insider.

A Bitcoin (virtual currency) paper wallet with QR codes and a coin are seen in an illustration picture taken at La Maison du Bitcoin in Paris, France, May 27, 2015. British authorities have come out in support of digital currencies in the name of promoting financial innovation, while proposing that regulations should be drawn up to prevent their use in crime. But it is technophiles who are leading the drive to make London a real-world hub for trade in web-based "cryptocurrencies", of which bitcoin is the original and still most popular. Picture taken May 27, 2015. REUTERS/Benoit Tessier - RTX1EWTP

A Bitcoin paper wallet with QR codes and a coin. Image: REUTERS/Benoit Tessier

Rob Price

Technology Reporter, Business Insider

Bitcoin is surging right now. The digital currency is hitting highs not seen since February 2014, jumping by well over 30% in a month.

It's great news for bitcoin miners, the people responsible for creating new bitcoins.

Mining infrastructure is the backbone of bitcoin. Anyone who contributes computing power to help process transactions on the network is rewarded with the chance to "mine" bitcoin.

In plain English, in return for helping keep the network up and running, they have the chance of being given a newly created piece of the digital currency.

This payout makes the entire process — with the right equipment — incredibly lucrative. It has helped spawned a huge and surreal industry.

You can mine at home, and many people do. But companies dedicated to mining have also sprung up, some worth tens of millions of dollars.

Image: Quartz

These companies build huge data centres, or mines, that consume vast amounts of power and perform insane computations on the hunt for digital gold.

Here's a look inside one:

These photos are from Genesis Mining, a cloud mining company. It lets customers mine using its "cloud," without having to buy specialised hardware. Here's its website.

Image: Quartz

It's technically possible to mine on just about any computer, but it's not profitable to do so unless you have the right kit. Many people do mine themselves, often joining large pools to improve their odds. But Genesis' model is another option.

Image: Quartz

The company had early mines in Bosnia and China, and most of its operations are now based in Iceland.

Image: Quartz

The country boasts three very important qualities for mining: cheap energy, good internet connections, and a cold climate.

Image: Quartz

Climate is incredibly important. Mining hardware generates a tremendous amount of heat and uses huge amounts of power. If you can save on cooling costs because of the natural temperature, it could mean the difference between losing money and making a profit.

Image: Quartz

Even so, Genesis' electricity consumption is very significant. CEO Marco Streng says energy companies "offer us helicopter rides whenever we arrive" and speculates that the company may be one of the biggest single users of power in the country.

Image: Quartz

Assuming you're getting a good deal on electricity — and ignoring all other costs — Streng says one bitcoin costs about $200 to mine. One bitcoin is currently worth $690.

Image: Quartz

But there are a lot of other costs, including hardware, production costs and staffing. "I think it is fair to assume that [mining] will probably balance out in the future at around plus or minus 20% compared to buying," Streng says.

Image: Quartz

Streng says cloud mining "has a major trust issue." Customers never actually see or own the mining hardware themselves — putting them at risk of fraud.

Image: Quartz

Ponzi schemes can pop up, with perpetrators using later customers' money to pay earlier customers while keeping most for themselves. "They don’t ever even own their own mining facilities. They just take pictures from other companies, Photoshop them, then pretend they are theirs."

Image: Quartz

Genesis doesn't just mine bitcoin. It has also started mining Ethereum — another type of digital currency that can support decentralised applications and "smart contracts" that execute themselves automatically.

Image: Quartz

The price of Ethereum is now $16.70, while Streng says electricity costs to mine it are $3.85.

Image: Quartz

Here's another shot of Genesis' mining operations. More than 10,000 mining GPUs are in this one room.

Image: Quartz

So what are the conditions like in the mine itself? Speaking in a promotional video, chief technical officer Stefan Schindler is candid: "Working inside a bitcoin mine is absolutely terrible."

Image: Quartz

"You're constantly surrounded by machines that are completely shouting at you all the time," he says. "It's as if you were listening to jets starting and landing without stopping." Heat is another factor — parts of the facility reach 40 to 50 degrees Celsius (104 to 122 Fahrenheit).

Image: Quartz

Here's one of the most interesting predictions for the future of bitcoin

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