A Bit about Bitcoin
People ask me questions, because I’m a Know-It-All. I try to be a good one and share what I know, what I can deduce, and admit what I don’t know. Lately, I get asked about Bitcoin, probably because the prices are so high and people hope to get rich. Now I’m no expert, I had to go look this stuff up, but here’s a cursory explanation.
Bitcoin is CryptoCurrency
I first learned about CryptoCurrency in Neil Stephenson’s novel Cryptonomicon. How it works is complicated, that’s how it prevents fraud. The simplistic explanation is that a Bitcoin is a file on a drive, that is encrypted in such a way that they know how much it is worth and that it isn’t a copy. Blockchains are used to do this, which for anybody not actually doing the math, is irrelevant how it works.
Mining for Bitcoins
Making Bitcoins is called mining. Computing any kind of encryption is processor intensive, so people setup[ a computer (or banks of them) with lots of processors. As it turns out, video cards have excellent processors for this kind of math, so people will stuff a ton of video cards in a PC and instal the mining software and let it work. Keep in mind, a good enough video card will cost over $500. Double that since miners have been increasing the demand for video cards past the traditional supply aimed at gamers. That was the common answer to get into mining.
The Ball has Moved
At this point, te blockchain complexity has increased such that even graphics cards aren’t fast enough and now specialized mining cards are used. One good GPU card would take 98 years to mine 1 block which yields 25 bitcoins. The professionals have cornered the market and as blockchains are mined, the next ones get harder. In short, you probably can’t break into mining.
That Bitcoin You Found On a Stick
Funny story. Well funny for us, not for the friend who it happened to. A few years back, he had done some mining and had a bitcoin or two. He found the USB drive recently and realized he’d forgotten the key to unlock the bitcoin. So he has $10,000 worth of Bitcoin that is worthless because he can’t access it. Don’t lose your key.
The Future of Money
I’m lukewarm on Bitcoin or any of the cryptocurrency. I live in a reasonably stable country. If things went nuts, scarcity tends to follow suit, so whether I use paper money, my bank card or bitcoin, prices are still going to be wonky. I have digital money today, I swipe my bank card and they deduct money. It generally works. I think the real allure of bitcoin is the idea that if you mine it, it’s free money. There’s limited returns in getting something for free.