The news release about a mining company venture popped into my inbox like so many others we receive each week. I glanced through it and just as I was ready to hit the forward button to send it on to our mining editor, I stopped. What’s that word: “cryptocurrency”?
As it turns out, the release was not about a mining venture after all – at least not the kind of mining we are familiar with in northeastern Nevada. Similar releases came to us over the next few weeks, all from companies that are diving into the blockchain market from roots as diverse as soft drink manufacturing, marijuana processing, and – yes — precious metals mining.
It’s been nearly a decade since Bitcoin launched its form of online currency. Now it seems like everyone is scrambling to join the craze, using insane amounts of energy and computer hardware to “mine” virtual cash. You might even be involved without knowing it, as some popular download sites have started hijacking personal computers to increase their capacity.
Traditional currency involves the forging of metals into coins stamped with symbols of value. Cryptocurrency involves forging massive strings of data “stamped” with encryption. These strands of binary information would be meaningless except for the fact that certain people have agreed they can be exchanged for other currencies, products or services.
Out of all of man’s inventions, money is one of the earliest and most abstract. It probably started when one of our ancient ancestors was bartering and decided to use an object to represent the value of something else. Written language itself may have been spawned by the first use of ledgers to track the value of exchanges between people.
The value of any kind of money – or even a commodity such as silver or gold — is based solely on a consensus opinion of its worth. Once you understand that, it is it is still a big leap to comprehend how cryptocurrency was invented and how it can be mined using an algorithm called a “consensus mechanism.”
“Those algorithms lay out how transactions are made and recorded, and how new coins or tokens are found and released. People and organizations known as miners keep records of every transaction and attempt to solve complex computer problems that, when solved, reward them with new coins as payment,” states an article at www.nasdaq.com.
Think of it as a big video game like Minecraft, with prizes similar to Chamber Checks or DBA Bucks.
The big difference between what we consider to be real money and the internet’s phantom version is who sets the value. The official currency of the United States is controlled by a central bank called the Federal Reserve System, while a cryptocurrency is controlled by its peer-to-peer network of members who set up digital ledgers called blockchains. The best way to understand how this works is to use Google Docs, in which any document can be shared by anyone who is allowed into a group of users.
Hacking is more difficult because the ledgers are “spread out” among the various users who can verify the legitimacy of transactions, yet recent security problems have led to a 30 percent drop in Bitcoin value – about the same amount that Wynn stock plummeted after its CEO was accused of sexual assault and harassment.
Bitcoin was invented by “an unknown person or group of people under the name Satoshi Nakamoto,” according to an article in The Economist. Now there are many other types and the number of miners is growing, as our email inbox reminds us on a frequent basis.
The Nevada Independent reported last week that Blockchain LLC purchased 67,000 acres at Tesla’s massive gigafactory complex in western Nevada. The investment equates to more than 100 square miles, but their CEO announced they do not intend to use the space for a large-scale cryptocurrency mining operation.
You don’t need a lot of real estate to become a bitcoin miner. A recent article at Quartz Media LLC tells how a student at MIT started his own operation by simply boosting his computer’s power with a graphics card, then adding more computers that he found weren’t being used on campus.
“Now, four months later, after bitcoin’s wild run and the diversification of his cryptocoin portfolio, Mark estimates he has $20,000 in digital cash,” says the article, which also explains that his profit margin is much higher than the average miner’s because he is mooching off of the school’s power supply.
A CBS News report from November states that bitcoin mining “consumes more energy than 159 countries.”
Market experts are wary of investing in cryptocurrencies, and for good reason. Like a chain letter, there may not be any value in them after a certain point. But for now there are plenty of websites — such as Investopedia — that are happy to instruct people how to get on board.
The future of the technology promises to deliver some big surprises, just as the internet has dramatically changed so many other aspects of our lives. Some experts predict blockchains will replace banks, while others report that banks are beginning to use the technology themselves. There may be no limit to the number of applications this game of encryption can be applied to.
The future of “mining” is definitely taking a bizarre turn. Those of us in northeastern Nevada don’t need to worry, however. There will always be a demand for precious metals. Sure, the microscopic gold being mined here from thousands of tons of dirt could be considered a form of “cryptocurrency,” but once it is processed into something we can touch and hold, it becomes a tangible asset that is much easier to tuck under a mattress than a computer algorithm.