Crypto News

When an algorithm becomes a bitcoin

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A journey through the complicated ways of extracting cryptocurrency: complete with mines and miners, it seems like a gold rush.

The shed of the Russian Mining Coin, a former car factory in Moscow, is pervaded by an acute buzz, like an endless swarm of bees. These are the fans that are used to cool thousands of computers in action. In one of the many Chinese plants scattered between the provinces of Sichuan and Shenzhen, the noise is even more deafening, with temperatures reaching forty degrees and big fans everywhere, positioned in front of the servers. To tell the phenomenon of Bitcoin you can start from here, from places where cryptocurrencies are made.

Better to leave aside the romantic vision, which refers to the anarchic matrix of cypherpunk, the movement born in the late eighties with the spread of the World Wide Web, which had (and for some still has) the utopia of achieving a social revolution and political through the massive use of computer cryptography, the hidden transmission of information, providing the multitude with a key to cancel power in the hands of central banks. Here, with the Bitcoin, we are in the pure twentieth century, with factories, workers, shifts without schedules and alienating work. Or, if you prefer, we’re back to the gold rush, with mines and miners. And, if in the case of gold there is a physical limit to the ore available, in the case of Bitcoin there is a pre-established algorithmic limit. In fact, Bitcoins, in addition to being exchanged without intermediaries, have the distinction of not being issued by banking institutions, but extracted (as from a mine, from which the English term mining) through the resolution of complex mathematical problems. It is a peer-to-peer system, like those for file sharing, where every computer in the shared network contributes to the management and security of bitcoins, and is rewarded in cryptocurrency for the work done.

Simplifying a lot: mining is the process by which information about Bitcoin transactions (so-called blocks) is added to the ledger where all transactions are recorded, called blockchain. In order for a block to be added to the chain, a computer must discover a particular code, which can only be identified by attempts. When the code is found, the responsible miner wins 12.5 bitcoins. The extraction process is designed to remunerate miners less and less over time, up to the limit of 21 million existing bitcoins, a limit that will be reached in 2031. In this respect, therefore, the cryprocks are perfectly comparable to gold: a poor good , finished, a commodity more than a coin. In the first four years, from 2009 to 2013, the network of all computers connected to each other for the coin produced 50 coins every 10 minutes. Today they produce at most 25 in 10 minutes and the number of connected computers has grown exponentially. The times when the first miner, according to legends of the web, would have extracted 25 bitcoins by itself by solving the very first easy rebus.

In fact, at the beginning the individual computers were able to carry out this activity on their own, but today the extraction of Bitcoin requires such complex computational capabilities that only groups of operators that combine their hardware systems, called “mining pools”, they can do it. So today, by subscribing to one of the Bitcoin mining pools and using special clients it is possible to divide the workload of the mining and the cryptocurrencies extracted with the computers of other users connected remotely, paying for the commissions of course. In addition, Asic Bitcoin Miner, computers to generate Bitcoins that consume less energy than traditional PCs, are available on the market. The monopoly of these machines to directly produce Bitcoin is Chinese and belongs to the Bitmain company, which periodically sells a thousand in online stock, resulting in a race to buy them.

o understand how much you earn from extraction then you need to put together some variables: the speed of calculation (also called hash rate), the number of Bitcoin assigned for each block (today 12.5), the cost of energy, commissions mining pool and above all the value of cryptocurrency in dollars. For those wondering if in Italy it is possible to make money like that, the answer is no. Enrico Marro on the Sole 24 Ore started to do the calculations. Let’s suppose we set up a mining operation, buying a two-bit Asco Bitcoin Miner, estimating mining pool fees at 2%, adding the cost of energy in Italy (notoriously high) and the current price of Bitcoin. Result: this business would lose around 17 thousand euros a year, over 1,400 euros a month.

That’s why today a large number of blacksmiths that for the Bitcoin extraction is located in China. Here there are low labor and microprocessor costs and, above all, electricity: in Xinjiang, Sichuan or in Inner Mongolia, energy comes from the hydroelectric plants located in the mountains. Moreover, despite the Beijing government banning the Bitcoin trade as early as 2013, individual entrepreneurs are allowed to make transactions in a crypto coin, with the result – according to a report by Goldman Sachs – that 80 percent of the volume of exchanges in Bitcoin involves the yuan.Bitcoin-corpo_03A documentary from China Central Television last July showed how we work in these sheds: between endless shelves of servers and fans, employees alternate for 24 hours seven days a week, with long shifts , reassembling the calculation tables and repairing machine malfunctions. They sleep in these mining farms, which are always in isolated places, many kilometers from population centers. They come home for three to four days a month. The problem is that these lost warehouses, where we would build a part of our future, are also a threat to environmental sustainability. According to a Digiconomis study, the average quantity of electricity used in 2017 to generate bitcoins surpassed the average annual energy consumption of 159 nations: 30.14 terawatt hours (Twh). A single bitcoin transaction requires, in terms of energy, the equivalent of the weekly needs of an average American family. In addition to the damage of coal, gas and oil, the problem of dependence on digital algorithms now arises.

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