Last week, I talked about bitcoin and tried to explain it in simple terms by comparing it to virtual gold. This week I continue that thread by talking about bitcoin mining. One of the parallels bitcoin has to gold is that it is ‘mined’, and there is a fixed amount of bitcoin available to be mined, just like there is a finite amount of gold on Planet Earth. When bitcoin is mined, the miners first validate bitcoin transactions and then they solve a complex mathematical problem. The first miner to solve the problem gets some bitcoin. In this way, the miners don’t just dig up bitcoin, but they also help make the bitcoin ledger work.
Just like with gold, if someone else finds it first, you are out of luck and must continue working to solve another problem. When the founder, Satoshi Makomoto, first established bitcoin as a digital currency, people began to offer to trade physical goods in exchange for this virtual currency. This gave bitcoin its first valuation. Essentially, things have value because we decide they have value. If someone is willing to trade a pizza for my virtual coin, then my virtual coin is valued at the market price of that pizza. The first “block” of bitcoin was ‘minted’ by the founder, but after that, all coins were ‘minted’ via the mining process. As demand for this currency grew, so did its value. As of this writing, 1 bitcoin is worth about $39,597. On May 22nd, 2010, a person agreed to trade 10,000 bitcoin for two delivered Papa John's pizzas, so that was the market value of bitcoin at the time… based on today’s valuation, that’s some very expensive pizza.
There are several controls around the mining process. For example, the rate of bitcoin mining is reduced over time; it is cut in half every four years. In 2009, you received 50 bitcoin (BTC) for completing 1 block of mining. In 2020, you receive 6.25 BTC for the same work, Essentially, when you complete the mining process, a transaction is recorded on the bitcoin blockchain transferring newly minted bitcoin to you.
Specialized computers have been created to be faster at mining, and these computers can use a lot of electricity. With the value of bitcoin at close to $40,000, many people are willing to pay for the power to run the computers to do the mining. Companies like Stronghold Digital mining are buying entire power plants to power their bitcoin mining operations. As I said, there is also a limit to the total number of bitcoin that can ever be mined. Based on current projections, it expected that all bitcoin will be mined by the year 2140*.
For many, this seems almost “inconceivable!” (To quote Vizzini from the Princess Bride) but it’s true, people are using entire power plants to run specialized computers to solve a math problem and generate a virtual digital currency. What a crazy world!
If you read The Quantum Contingent, you’ll meet an agent with the same name as the country that The Princess Bride is set in (Florin), and you’ll hear a few more Princess Bride quotes along the way.
Speaking of the book, I received my professional editorial assessment back last week and am furiously working on updates based on the insightful feedback from my editor. I am also making many edits based on feedback from my daughter, who is serving as a developmental editor for me. (She had the idea for me to write a novel in the first place!) The good news is that I should be able to get a first pass of these edits in place quickly, so Beta Readers, your copy should be arriving in your email in a couple of weeks.
I hope your weather is as nice as mine is now! Enjoy every moment, and stay healthy and safe,
Greg's blog will cover some of the things he learned as well as some of the tech and locations he used in his new novel, The Quantum Contingent.