Bitcoin mining is just like the gold rush a few decades ago. People are not digging holes by hard tools anymore. They are now calculating the long number strings by computers, GPUs and ASICs.
Bitcoin is invented by a guy called Satashi Nakamoto in 2009. I believe he is a mathematics geniuses. A bitcoin is, in a layman term, a very long string of numbers. If it is stored in a computer, it is a string of 0s and 1s. Well, everything stored in a computer is the combination of 0s and 1s.
Unlike the other digital or physical currencies, bitcoin is not backed by anything. Bitcoin has limited its quantity by the sophisticated mathematics behind. Every bitcoin (the very long string of 0s and 1s) can fit into the complicated mathematical calculations and be verified as genuine. Any random strings of 0s and 1s would give a fault result in the calculations.
Since the quantity of bitcoins is limited, in this age of unlimited QE (Quantitative Easing), some people start to believe the bitcoins can be more valuable than the printed notes. The anticipation of people has sent bitcoins’ value on a roller coaster track. It could be up to $1000 and down to $300 in a matter of days.
There are stray amount of bitcoins literally vanished or lost since their creations. Given the surging value of the coins, people are now “digging” in the sea of numbers for them.
Bitcoin mining is actually a reverse engineering in calculation. Since the number of coins is limited, the faster the calculation, the more coins one can get.
Even the simplified calculation shown in the above diagram terrified me.
Less than a year ago, people were doing it by running an open source program on a laptop computer. They quickly ripped some low hanging fruits. When more computer geeks joined the game, some of them found that bitcoin mining by GPUs (Graphic Processing Units) can be much faster. They modified the program for the GPUs and grabbed some higher hanging fruits. Since the competition is so high, the ROI of using bitcoin mining GPU is approaching negative. The GPUs are consuming so much power that the obtained bitcoin could hardly pay for the electricity bill.
Now people are migrating to using bitcoin mining ASIC (Application Specific Integrated Circuit) to get the remaining fruits. The ASICs are integrated circuits specifically made to do the reverse calculation only. It cannot do any other things. Given its lower power consumption, people believe that a thin layer of ROI is still available. There are shovel sellers in the digital market just like in the gold rush. The ASIC hardwares are readily available in the market.
There are some very handy, but low speed, ASIC USB dongles.
Some very aggressive bitcoin diggers are employing more serious gears. Their speed is 30 times higher than the tiny USB devices. You can find them in Amazon.com.
Anyway, when the machine is started, it is printing the money automatically. It’s only a matter of time.