You already know that Bitcoin is a digital currency, but you really want to understand what Bitcoin really is or where it comes from and who is using it so much and why the hell is it becoming such a goldrush! Here, we will sum it up for you.
Where do they come from?
The Bitcoin generating process is called “Mining”. Mining Bitcoins is basically using your computer to compute billions of 1-way cryptographic algorithms, looking for a single one that will solve a “block”. By doing this, your computer is actually validating the authenticity of recent transactions. Approximately every 10 minutes (the Bitcoin network automatically adjusts itself so it takes on average 10 minutes), someone’s computer solves the block and is rewarded with 50 Bitcoins (BTC). Many people pool together their computing resources and share the 50BTC. Then you have your money, free of tax, perfect for an online shopping spree!
What’s the actual value of 50 BTC?
According to Mt. Gox, the largest Bitcoin exchange service handling almost 80% of all Bitcoin trades today, the exchange rate of Bitcoins is as high as $126. The prices have spiked as high as $258 in the last few months, but the current rate is only about half of what it used to be.
What the heck! They look like…
Yes, this is a Bitcoin Mining rig- a handmade type. With 4 GPUs running in unison, this high powered rig can throw out 80M hashes per second. It has a much higher chance of solving the cryptic puzzle and getting the cash than your single low powered laptop GPU that can barely spit out 3M hashes per second. So, no you can’t make money sitting on your couch doing nothing. Next time, try to arrive earlier to the party.
Great! So where can I start? I have a computer…
Hold on a sec. Let’s not get caught up in the winds and fly too high already. Money doesn’t come the easy way if you arrive a year late to a Silicon Valley project. Yes, Silicon Valley members, VCs, evangelists and a bunch of other tech giants from China are starting to pay attention to this gold rush, and they want in. Here comes the challenge, hardware. To compute millions of bits of data per milliseconds your computer is consuming loads of electricity, and it’s not cheap.
So I need to set up a mining rig? That’s it?
You wish it was that easy. But it isn’t; because there is a place called China and they want their piece of the Bitcoin Pie. Meet the application-specific integrated circuit (ASIC), devices straight from Shenzhen, China. Built by a former New York University student, Yifu Guo, who was studying Digital media in 2011 when he discovered Bitcoin for the first time. He thought it was the “Stupidest idea ever” but soon he took the lead manufacturing the world’s first commercial ASIC devices. These machines are not computers. They are designed to do one thing, mine Bitcoins. At full throttle, these ASIC devices can throw 60G hashes per second. With its enormous computing power, these devices are going to bring a whole new level of competition for the lightweight miners using PC hardware. Their rigs are utterly useless in comparison to ASIC devices. How much do the ASIC devices cost? The first batch of ASIC devices were $1299 each but now for the 4th batch, the price is set to 75BTC ($9600) – a bit high if you are just thinking about starting your Bitcoin mining career.
This guy is a self proclaimed “Bitcoin investor”. Meet Charlie Shrem, 23. In his senior year at Brooklyn College, he first got his hands on bitcoin. That was back in 2011. He bought 500 bitcoins at $3 – $4 each and after the prices started to show some spikes, he bought thousands more. Eventually, when the market prices skyrocketed, Shrem set up a company named BitInstant. It lets the user purchase bitcoins from over 700,000 markets. Charlie is also famous for wearing an engraved ring with his bitcoin account password.
In 2010, Jered Kenna was a hot topic after he erased 800BTC from his computer which could worth over $200,000 now. He’s not upset about that, he’s got more. Jered is also known as the Bitcoin Jesus for giving out free Bitcoins. He considers Shrem as a very close friend. Jered is also the CEO of Tradehill, the second largest Bitcoin trading hub after Mt. Gox.
The Winklevoss twins
Yes, they are the twins from Facebook. It seems like the twins haven’t missed the party this time. Becoming early investors in the Bitcoin trade business has given them a great advantage and right now they own 1% of all Bitcoin that exists in cyberspace. It is estimated to be about $11M.
It’s your turn!
The Bitcoin’s future remains uncertain, but it’s a very interesting new trend to watch out for. Should you invest in it? Totally, because just too many people are getting into it and in cyberspace, there is always more money to be made. Take the blue pill and Bitcoin it is. What is your experience with Bitcoin? Would you put any effort into this? tell us about it.