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A HUGE aircraft hangar in Boden, in northern Sweden, big enough to hold a dozen helicopters, is now packed with computers—45, of them, each with a whirring fan to stop it overheating. The machines pictured work ceaselessly, trying to solve fiendishly difficult mathematical puzzles. The solutions are, in themselves, unimportant. The machines in Boden are in competition with hundreds of thousands more worldwide. Receive our Daily Dispatch and Editors' Picks newsletters. But stability is important too: On January 5th Bitstamp, another bitcoin exchange, halted operations and reported that 19, of the currency units had vanished in an apparent hacking attack.
When Mr Nakamoto announced his invention but not his true identity, see article , several digital-cash schemes, including DigiCash and e-gold, had failed, or were in their death throes. This contains the history of every transaction in the coin, and copies of it are held on many computers around the world. The computers that solve the puzzles also process transactions in the currency and update the blockchain.
Every ten minutes each machine or group of machines takes a block of pending transactions, and uses it as the input for a mathematical puzzle. The first to find a solution announces it to the rest, which check that it is right, and that the transactions are valid.
If a majority approve, the block is cryptographically attached to the ledger and the computers move on to a new set of transactions. If a fraudster wanted to spend a bitcoin twice, he would need to disguise it by rewriting the ledger.
The enigmatic Mr Nakamoto designed the system to keep everybody honest. For instance, successful miners have to wait for a further 99 blocks of transactions to be processed before they get their rewards—so there is a constantly refreshed pool of participants with an interest in ensuring that everyone else keeps to the rules.
The system of rewarding successful miners with bitcoin has proved an effective way to get the currency into circulation. Operators of conventional payment systems live on transaction fees, but that business model would not have worked for bitcoin in its early days, because of a lack of users.
However, as bitcoin becomes more popular, the idea is that miners will be able to start charging significant transaction fees, and that these will become their main source of income. It will need to: Individual miners started to combine their computing power and share the rewards.
Startups from all over the world began building specialised hardware powered by custom-built chips, known as application-specific integrated circuits ASICs. Leaving the amateurs behind, these firms soon became locked in a digital arms race. In the case of mining ASICs, this doubling has occurred every six months. Mining has also moved into the cloud.
Given the nature of the business, one would expect the bosses of bitcoin-mining firms to be super-geeks. But instead of coming from Silicon Valley, they typically hail from places like Sweden and Georgia—and talk and often look more like real miners. Like other energy-intensive industries such as smelting aluminium, minting bitcoins is more efficiently done at scale, and in places where electricity is cheap and reliable.
It also helps to be somewhere cold, to reduce the cost of cooling the machines. The makers of mining computers benefit from the way the bitcoin system adjusts the difficulty of the puzzles, every two weeks, according to how much computing power is hooked up to the system. In theory the difficulty can be adjusted in both directions: But until now the difficulty has mostly gone upwards: As a result, new mining computers, which each cost several thousand dollars, have been becoming obsolete in a matter of months.
When the bitcoin price was rising, many of its fans thought investing in mining equipment was a better bet than simply buying and holding the currency. They were willing to plunk down top dollar months ahead of delivery of the computers. These advance payments allowed KnCMiner and other makers to manage without having to raise any financing.
What happens in the wake of the bitcoin price collapse is unclear. The long queues for mining rigs have dispersed. Demand for renting cloud-based hashing-power is stagnant. Many equipment-makers have ended up running the machines for their own benefit—and selling some of their stock of bitcoins to cover costs.
Some people say this is why the currency has kept falling. People in the industry are already discussing at what price mining becomes unprofitable. But Mr Cole is unfazed. Where others see a weak price, he just sees all the bitcoin yet to be mined, and lots of struggling rivals set to exit the business.
If other miners do give up, the difficulty of the puzzles may fall—so winning bitcoins would get easier. Perhaps it is a good thing that the breakneck growth of a year ago has ended: The bitcoin protocol in its current form can only process seven transactions per second—nothing compared with the capacity of conventional payment systems such as Visa, which can handle 10, Become The Bitcoin Guy, or Gal, in your area.
Financially and spiritually rewarding. Plus, there are plenty of places, languages, and people looking for more information on Bitcoin. No overhead, but incredible returns. All you really invest is your time, and you can sub-contract or outsource things you may not do well. This is probably the best place to start. And if you speak another language, you can crush it in foreign markets as a pioneer. An ocean of potential here. This is a pretty new business model and as more and more people are looking to mine Bitcoins it will probably get more lucrative.
The idea is that you set up a network of miners and let people buy contracts from you in order to join the mining process. Cloud Hashing does a good job at explaining this in more detail. Not a shoestring home start-up to be sure, but a way for a true salesman to get started. Take advantage of the appreciation and growth of Bitcoin, and open a store that accepts payments only in Bitcoin.
You can undersell your competition in price, take Bitcoin payments, and leverage their naturally increasing value as a profit margin. Take Litecoins, Altcoins, Dogecoins, and exchange them for Bitcoins or vice versa.