I Am A Bit­coin Miner

The se­cret fac­to­ries where dig­i­tal cur­rency is made

World of Knowledge (Australia) - - Contents -

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.


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.

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