I Am A Bitcoin Miner
The secret factories where digital currency is made
rom the outside, the place where the money is created looks pretty ordinary. A nondescript warehouse with no fancy signage, no high-security barriers, no soldiers on patrol. But looks can be deceiving. Behind its bland exterior, the whereabouts of which is known only to a select few insiders, lies a vast space that resembles the control room of a spaceship. A loud hum throbs incessantly through the building. Warm air heated to 45ºc flows through endless corridors lined with hundreds of applicationspecific integrated circuits. Better known as ASICS, these super-advanced computers have been created with just one purpose in mind: to solve highly complex mathematical equations. Their reward for doing so is a virtual one: they receive bitcoins, the dollars and cents of the internet.
WHERE ARE THE MINES OF THE MONEY-MAKERS LOCATED?
If you were to personally print a $50 note, it would always be a counterfeit – no matter how perfectly you imitate it. It’s also a criminal offence, regardless of the currency you’re trying to forge. Only central banks can issue currency and control the amount of money available. Australia’s central bank, the Reserve Bank, also sets interest rates, acts as the lender of last resort to commercial banks on the high street and provides banking services to the government. But what if there were no banks? What if all payers and payees were to agree on an asset considered a universal medium of exchange, like gold? Only one that exists virtually,
“It’s loud and very hot. But that’s how money is made.”
like the credit on a credit card? Well, that’s exactly how Bitcoin works. It’s a virtual currency controlled by a mathematical algorithm, rather than the governor of a central bank. It prevents counterfeiting and limits the availability of monetary units – the foundation of trust in the stable value of a currency. After all, bank notes are just bits of printed paper that can quickly lose their value. The inflation rate sees to that.
Its most important characteristic then, and the thing that makes it different to conventional money, is that it is decentralised. In principle, Bitcoin is nothing more than a vast public ledger which accurately records the respective balances of its users, as well as storing every transaction that ever took place around the world (see diagram). To date, this index, which has a current value of around $9 billion, has never been successfully hacked. To do so, you’d have to take control of more than half of all of the millions of computers that monitor the system, all of which contain a constantly updated copy of the ledger – an incredibly complex task.
The infrastructure for checking and authenticating payments – something normally done by banks – is provided by specific users known as ‘miners’. Miners use special software to solve encrypted codes that confirm that the payer really can spend a specific amount. This verification process takes roughly ten minutes to complete, after which time a certain number of bitcoins are issued – part of the 3,600 that are ‘mined’ each day. And that happens in a bitcoin mine.
“It’s loud and very hot. But only with the maximum amount of computing power can electricity profitably transform into money,” explains Stefan Schindler of Genesis Mining, the world’s biggest digital mining operator. They’re called ‘miners’ because new goods really are being created there – just as in a gold mine, where precious metal is extracted from the soil. Many of them are located in places like Iceland, where icy temperatures and 100% renewable energy are attractive draws to companies looking for a base for their power-consuming, heat-producing machines. After all, a large mine needs about as much
“Every day counts for us.”
power as a small city. Some are also located at ASIC manufacturers, where getting hold of newer, faster models won’t present any problems. “Every day counts,” explains Genesis Mining’s Marco Streng. Investing in the $1,500 devices is worth it: every bitcoin can be converted into ‘real’ money. With each coin worth around $790 at the time of press, miners earn around $2.3 million a day collectively. Consumers can also buy things directly with the digital money. Anything from pizza to weapons can be traded.
Algorithms ensure that the amount of bitcoins available is limited because mining new money eats up electricity and computing power. With the growing size of the system, Bitcoin mining will also get continually more time-consuming. That’s something not lost on Streng. “At the moment we’re considering building our own power station for generating electricity.”
SECRET MINES Dozens of data centres used for generating digital money are located around the world. For security reasons, their exact locations remain a secret.
MARCO STRENG of e es s
MONEY MINERS The server farms use vast amounts of energy and produce lots of heat. This makes Iceland an ideal location for Bitcoin miners: the climate is cold, the electricity is cheap and the internet is fast.
ENERGY PROVIDER A bespoke electricity source could make financial sense for large mines.