Bitcoin miners find it increasingly hard to make money, South China Morning Postbode
It’s becoming increasingly harsh to earn money from making bitcoins, it’s the makers of souped-up laptop equipment that are minting it
Reuters UPDATED : Thursday, 28 Nov 2013, 9:58AM
Tucked away ter an airconditioned gegevens centre te Silicon Valley is a hotchpotch of black boxes, circuit boards and cooling ventilatoren wielded by 27-year-old Aaron Jackson-Wilde, a modern-day prospector looking for bitcoins.
Since discovering the digital currency a few months ago, Jackson-Wilde has paid about US$Two,000 for his ",equipments",, which are powered by specialised pc chips. They are designed to help operate and maintain the bitcoin network – and, ter comeback, generate a petite prize ter a process known spil ",bitcoin mining",.
A form of electronic money independent of traditional banking, bitcoins embarked circulating ter 2009 and have since become the most vooraanstaand of several fledgling digital currencies.
While they quickly gained a reputation for facilitating drug deals and money laundering, bitcoins have of late garnered attention from investors, such spil venture capital rigid Andreessen Horowitz. The volume of transactions using Bitcoins today remains miniscule, but enthusiasts believe the peer-to-peer currency will play a major role ter e-commerce and could eventually become spil ubiquitous spil e-mail.
Bitcoin mining is based on a unique feature of the digital currency. Unlike traditional currencies, where a central handelsbank determines how much money to print based on goals like controlling inflation, no central authority governs the supply of bitcoins.
Instead, bitcoin transactions are tracked by a network of computers that solve sophisticated mathematical problems to validate transactions and prevent counterfeits. The system automatically generates fresh bitcoins spil the maths problems are solved and prizes the laptop operators.
Ter a key twist that keeps inflation ter check, the difficulty of the cryptographic maths that leads to freshly minted coins grows spil more computers join the network.
That has led some technology professionals to target a fresh market te souped-up computers and specialised chips aimed at the growing ranks of bitcoin ",miners",.
Consider Ravi Iyengar, who very first heard of bitcoins about six months ago. Since then he has abandon his job spil a senior chip bouwmeester at Samsung Electronics and raised US$1.Five million to launch CoinTerra. He says he has already pre-sold more than US$Five million worth of the hardware he has designed for bitcoin mining.
",I&apos,ve bot te arms races across my career – AMD, ARM, Intel,", said Iyengar, referring to vooraanstaand semiconductor companies, ",but none of them match the energy of bitcoin mining. Each month te bitcoin mining is like a year.",
Little is known about exactly who commenced bitcoin, but the concept wasgoed introduced ter a 2008 paper written under the pseudonym Satoshi Nakamoto. Since then, Satoshi Nakamoto has become sort of a patron saint among advocates pushing for bitcoins spil an alternative to national currencies.
Bitcoin is not backed by physical assets, is not run by any person or group, and its value depends on people&apos,s confidence te the currency. The dollar price of bitcoins has spiked overheen the past year spil more people became aware of the currency and speculators leaped into the market, which remains very volatile. Bitcoin recently broke US$200, compared to US$12 a year ago.
The objective of bitcoin miners is to pull ter more than what they spend on their equipments – some cost overheen US$20,000 – and the electrical play they need to keep the machines running 24 hours a day.
It has become so hard to make a profit that comparisons to the 19th century California gold rush, when money wasgoed often made selling shovels to naive prospectors, have become a running joke among bitcoin miners.
",It&apos,s the guys who sell the equipment who are making the money, not the bitcoin miners,", said Jackson-Wilde, a manager at a company that makes motorcycle batteries.
CoinTerra believes spending on fresh bitcoin mining chips could lightly kasstuk US$100 million a year for the next three years, assuming no switch te prices. While that is peanuts for large semiconductor companies like Intel and Qualcomm, it is a lucrative market for puny developers.
About 11.9 million bitcoins, worth US$Two.Four billion at latest prices, have bot minted since the currency began circulating. Based on latest activity, the network is on track to create around 1.Four million fresh bitcoins annually overheen the next three years, the omschrijving of more than US$280 million a year at latest exchange rates.
Reflecting growing competition, Jackson-Wilde says his gear – which features specimen names like Erupter, Jalapeno and Spartan – now pulls ter a little fraction of the bitcoins it used to, but he expects another US$Ten,000 worth of next-generation equipment to waterput him ter the black.
Despite the expenditure, he considers himself a hobbyist committed to supporting the bitcoin network rather than a serious digital-currency investor.
",Buying and selling bitcoins is enticing, but it&apos,s not spil enticing spil being part of it and actually having hardware,", he said.