CRYPTO-NITE
BOMBER Thompson, pictured, has always been an enigmatic figure.
He was mysterious even when he was the premiership coach of Geelong Football Club, shunning media scrutiny and keeping himself very much to himself.
I don’t want to talk about Bomber’s recent brush with the law over drugs allegedly found at his Port Melbourne property. Even though that is shaping as one helluva mystery.
The mystery unravelling for me is Bomber’s recent passion for trading Bitcoin, the virtual currency built on complex maths that ensures its scarcity.
Footy legend Bomber has been speculating on the cryptocurrency markets since early last year, telling News Corp in December that he had been “actively investing for 10 months”.
“For the first time in a while I’ve found something that fulfils me,” he said in the Daily
Telegraph. “I enjoy doing it — it’s competitive — you win or lose money and sometimes it’s chaotic and your mind is just going crazy, and I like that.”
Certainly, Bomber was cashed up when he joined the Bitcoin craze, with reports he sold a share in an Armstrong Creek farm for a $7 million windfall. His original outlay was $394,000 in 2005.
That was in March, about the same time as he says he started speculating on virtual currencies.
That was when one Bitcoin was worth about $1500 Australian dollars.
How much did Bomber invest then? We don’t know, although Bomber did say when asked: “You don’t have to invest too much for it to go into double digits, mate — if you pick smartly.” Double digits? What did he mean by that? This got me thinking. Perhaps Bomber banked his $7 million and decided to reinvest his original Armstrong Street stake of $394,000 in Bitcoin.
This would have bought him a grand total of 250 Bitcoin.
He would have been sweating on that.
Bitcoin had doubled in price over the previous year.
Would that growth hold before a bust, before the whole thing came crashing down?
When Bomber spoke to News Corp in December, he was a happy man.
Bitcoin had exploded from $1500 in March to a mindboggling $23,000.
If Bomber had invested his $394,000, it would have been worth a cool $5.7 million, almost as much as the property deal he waited a decade to deliver. No wonder he felt fulfilled. Perhaps when Bomber was talking about double digits he meant in the millions. This would mean his original stake was closer to a million bucks. And if that was the case, by December his investment would have been worth $14.6 million, well and truly double digits. Of course, this is all speculation. We don’t know that Bomber actually invested any of his cash into Bitcoin. But he was certainly upbeat and far more forthcoming than his usual reticent self. The point of this story is not whether or not Bomber made a stack of money. There’s another side to the coin, and that’s the crippling costs of Bitcoin trading to the rest of us. Electricity is Bitcoin’s kryptonite. As bizarre as it sounds, Bitcoin is mined in much the same way as gold.
Instead of digging into dirt, Bitcoin miners deploy enormous batteries of computers to solve complex maths problems that support the encrypted currency network — and they get Bitcoin in exchange.
As the network grows, so does the demand for computing power — and more electricity. If you believe the analysts, the energy used to release one Bitcoin into the market today would power a house for up to a month.
Globally, the Bitcoin economy would power a nation such as New Zealand and many analysts predict energy consumption will triple over the next 18 months.
Already, miners are fleeing China and chasing the cheapest power prices across the globe, effectively driving up the cost of power wherever they land.
What bothers me is that a virtual currency has no intrinsic value (would any of us miss it?), but fancy pants transaction security will drive up our power bills.
Unbelievably, anyone can create their own cryptocurrency (the software is open source and Kodak is the latest to launch one), which means this craze has the potential to inflate our energy crisis. Who let this happen? Oh, that’s right. The people we elect. Peter Judd is newsroom operations manager for News Corp and a former editor of the Advertiser.