Ever wondered what it's like to mine bitcoin? Or ever tried to wrap your head around the idea of cryptocurrency? Ben Mack dove deep into the trenches to investigate.
It was a desperate hour.
The realisation was terrifying: there I was, on the other side of 25, and still had about as much savings as a cat has patience for a piece of fish left unattended on a kitchen counter.
I had dreams. Goals. But so far, I was directionless. A missed paycheque from being homeless. One mistake away from being jobless. Just, less.
I wasn’t getting any younger. If I was going to get to Antarctica just to say I went there, I needed the means to execute such a plan.
Solution: get money. Fast.
Wracking my brain like opposing coaches try to figure out how to guard LeBron James, there were several choices. Running off to Sky City to take my destiny into my own hands by betting my meagre life savings, maxing out my credit cards, and taking out multiple loans from every ‘instant cash’ or ‘payday loan’ joint on the North Island with bars on the windows was an option.
There were other alternatives. I could hang around the airport in the hopes strange gentlemen would need someone to fly their luggage somewhere. It would be a great way to see the world. But it would also be a great way to get locked up for the rest of my life.
Then one morning, while taking a cold shower to shake off the cobwebs of a hangover, it hit me.
- Part 1: The plan -
The idea was genius. Everyone seems to be making bank off bitcoin, or at least has been since Satoshi Nakamoto debuted it in 2009. Plus, all I needed was to keep my computer on or something, which I already did anyway. Easy, peasy, lemon squeezy, seven-star hotels in Dubai, Savile Row on speed-dial and Dom Pérignon for breakfast here I come! Or at least top-shelf branded cereal. Baby steps.
But first, I needed to figure out how one even mined bitcoin. Like any person trying to learn something new, I headed straight for Google. Typing in “how to start mining bitcoin,” I was confronted with this:
I could feel my hope evaporating as each link was nothing but a trainload of tedious techno-babble. Things I don’t have: a doctorate. Cybernetic implants granting me superhuman intelligence. How was I supposed to understand any of this nonsense?
But like Sir Edmund Hillary and Tenzing Norgay summiting Everest, Amelia Earhart flying around the globe, or Roald Amundsen reaching the South Pole, I soldiered on. No-one ever said achieving fabulous wealth and success was easy (well, maybe Donald Trump, but he’s only… wait, nevermind).
Leaning back in my grey non-swivel chair – originally purchased on sale at Kmart – another moment of inspiration struck. Successful people aren’t afraid to ask for help, right? Didn’t Elizabeth Holmes start Theranos only after seeking advice from very smart people and then taking their advice on-board as she created an ethical biotech company that continues to make a positive difference in patients’ lives around the world today? Something like that. Though I think I read something about her facing a few decades in jail.
Anyway, I turned to my old friend Artie, the ‘artificially intelligent chatbot’ created by Simplicity KiwiSaver to answer financial questions. Our last conversation about bitcoin proved less than enlightening, but I hoped he’d come through this time.
So much for that.
- Part 2: The preparation -
Fun fact: Harry Potter was first rejected by at least a dozen publishing houses. The initial Chicken Soup for the Soul book was rejected by publishers no fewer than 144 times – almost as many as the 162 rejections Dick Wimmer’s Irish Wine received. In other words: try, try, and try again (something which Idealog recommends as a possible strategy for innovating, and which you can conveniently read about here). In keeping with that great tradition of perseverance, I kept on keeping on. Persistence. Persistence. Persistence.
Going back to my Google search, as the hours spent looking at the screen turned into days, slowly I began to grasp the basics (thanks, WikiHow!)
To mine bitcoin, what I gathered was:
1. Have a desktop computer or laptop with an internet connection.
2. Download a “bitcoin wallet.” This can be done by Google searching “download bitcoin wallet” and following the least suspicious-looking link.
3. Download a bitcoin mining programme. Again, a basic Google search is fine.
4. Run said bitcoin mining programme, and make sure to save the data to your bitcoin wallet. For added safety, make sure your “wallet” is stored offline, like on a thumb drive.
5. Voila! You’re now a bitcoin miner. Cue the corny mining songs.
Steps one and two went off without a hitch, even if my fancy-schmancy ‘wallet’ had far more security layers in accessing it than my actual accounts at actual, physical banks. I didn’t know if that was a testament to improvements in combatting bitcoin theft or an indictment of how little banks seem to care about small accounts from immigrants on temporary visas when opening them.
It would’ve saved a lot of time, but it was only after all that I found this TED Talk:
This talk was also incredibly insightful:
And this one definitely gave me unhealthily high expectations:
Someone had asked me why I was attempting to mine bitcoin, and not one of the many, many other “cryptocurrencies” like MaxCoin (created by Russia Today
crank genius Timothy Maxwell “Max” Keiser, presumably with Vladimir Putin’s personal permission, and which is totally not related to an actual thing called PutinCoin and its eerily similar totally different sycophant rival, TrumpCoin) or Coinye (probably a good thing, since Kanye West’s lawyers sued it into oblivion back in 2014. Seriously, Yeezy? You’ve let us down yet again). To be honest, I wasn’t entirely sure. I figured it was the safest cryptocurrency, had the greatest chance at wealth beyond my wildest dreams… and probably wouldn’t lead to me accidentally running afoul of international sanctions, resulting in the feds hauling my butt back to the US in actual chains (a possibility for US citizens investing in the Venezuelan government’s new cryptocurrency, the Petro), or awkward questions with my traditional bank if I were converting money from PotCoin into dollars.
Anyhow, unhealthily fantasy obsessed as I am, when I thought of mines and miners, I immediately thought of the seven dwarves from Snow White and/or J. R. R. Tolkien’s Mines of Moria. I just prayed there wouldn’t be any digital Balrogs on the expedition I finally felt qualified to undertake.
- Part 3: The execution -
I was all set to start mining away. But just as I was about to click ‘start’ on my work laptop (because how epic of a story would it be one day to say the secret to my wealth was using a work computer?) I came across information that bitcoin mining uses M-A-S-S-I-V-E amounts of electricity – so much so that, collectively, it’s more than entire countries.
This had me worried about how much energy might be flowing into my little laptop that sometimes struggled handling the processing power required to play high-resolution YouTube videos. What good would being sickeningly wealthy be if I were incinerated from my computer exploding?
Deciding that turning my phone into a mining machine (which is also possible, and may or may not be a terrible idea, what if Apple banning mining on iOS devices is any indication) instead was not the way to go, I turned to MYOB’s Keran McKenzie for wisdom. The company’s “futurist-in-residence,” he knows his stuff. He didn’t think I’d make much money – in fact, he thought I’d end up spending far more on electricity than whatever it was I was able to mine.
The same went for my company’s chief IT wizard, who warned it was a rather foolish endeavour to mine cryptocurrencies like bitcoin on one’s laptop. He said this was why most serious miners used massive server farms, and were taking over entire towns in places like rural eastern Washington state in the US because real estate was affordable and the electricity was cheaper (but mysteriously passing over my home state of Oregon just south from Washington, even though electricity is just as cheap and real estate is even more affordable).
“Who knows himself a braggart, let him fear this, for it will come to pass that every braggart shall be found an ass,” goes the William Shakespeare quote. Not one to mess with the wisdom of the Bard, I thought it’d be a good idea to find out from McKenzie what other concerns there were with mining – and what the potential was.
“When I think about blockchain and crypto at its purest, it’s about flipping the establishment,” he told me. “When the people rise up behind a coin or token, it’s revolutionary.”
YES! I could be rich and revolutionary! Eat your heart out, economists who would think otherwise.
McKenzie had more wisdom to impart. He said I was lucky to be mining in New Zealand, because other places – such as Plattsburgh, New York – had banned at-home cryptocurrency mining because it used too much power. At the same time, entire nations like Vanuatu were offering citizenship for investing enough bitcoin.
Then there was what he said about the potential for cryptocurrencies to lead to a more open society that could help rein in unaccounted-for-cash being used for illicit enterprises like drugs, arms deals and sex trafficking by gangs, organised crime and more. In other words: bitcoin could help save the world.
What McKenzie said about transparency really piqued my interest. Wanting to know more, I got in touch with Joni Brennan, the British Columbia-based president of the Digital ID & Authentication Council of Canada (DIACC).
I was glad we chatted.
According to her, New Zealand has been a real innovator when it comes to digital identity – and cryptocurrencies like bitcoin are affected by that. “It was New Zealand that, very early on, recognised that proving one’s identity (identity proofing) should be kept as a separate function from that authentication (credential) management. The idea here is that the two functions are distinctly separate and yet related. Componentisation of functions is part of a broader strategy to manage and innovate within complex systems. Other countries around the world have since followed this practice. Further, New Zealand is small enough to be more agile in ideating, testing, and launching new innovations.”
I was really starting to believe the hype about the transformative potential of cryptocurrencies. From being able to use the heat generated by mining to warm homes and even grow food (like what a start-up in Canada is doing), I was absolutely pumped by what McKenzie said about how our cryptocurrency and blockchain knowledge at present was only akin to where we were at with the Internet in 1994. The world was changing – McKenzie’s warnings about “quantum computing” potentially busting the whole cryptocurrency thing up be damned.
With a Saturday morning flight down from Auckland to catch up with some friends in Christchurch, I had a whole weekend to mine. I downloaded NiceHash as my mining software (which may or may not have been because it literally was one of the first Google search results for ‘mine bitcoin,’ and I liked the connotations of the word ‘nice’ in the name), followed the step-by-step installation instructions, and clicked cute little smiley face desktop icon.
I said a silent prayer my laptop wouldn’t melt while I was gone.
- Part 4: The aftermath -
It was a dreary, grey morning when I returned to the office. Melancholic as the weather was (or at least as grim as Christchurch had been that weekend – the ideal setting for a horror film or great gothic novel), it failed to dampen my spirits. Literally skipping to my desk, my eyes searched the screen with the same giddiness as a kid on Christmas morning.
My weekend of mining had yielded 0.00000609 bitcoin a day, equivalent at the time to about 4 US cents.
I had no words.
The warnings about power use were correct: with so many people competing for only a finite number of coins, only a large-scale operation employing a great number of specialised mining machines (which are also sold commercially) could have any hope of turning a profit. So why all the hype? Was the value really being manipulated, as news reports suggested?
Changes in bitcoin value (in USD) over time:
Centrality’s Jerome Faury said a lot of it had to do with the potential to disrupt how we do business with each other – a potential, he said, that extends far beyond finance. He knows a thing or two about that – after all, the company he’s general manager of (Centrality) enables separate businesses to work together to gain scale through shared acquisition of users, data, content and merchants, and has partnered with leading innovators in key industries (tourism, health, mobility and banking) to create a marketplace of applications that allow consumers to manage everyday tasks and experiences using peer-to-peer transactions, all via one login and using blockchain-enabled infrastructure. Oh, and he was also one of the founding members of Payment Express, turning it into one of the largest processors in the Asia/Pacific region, handling more than $40 billion of transactions a year across more than 15,000 merchants.
MYOB’s McKenzie also said something similar – re-emphasising that our knowledge of bitcoin at present is akin to what we knew of the Internet’s capabilities in the early 90s.
Enlightening as our chat was, I kept stewing over what went wrong. Maybe I should’ve teamed up with a New Zealand company like MyCryptoSaver (check out our story on their early days here), where I could’ve bought and sold bitcoin – like trading any other currency – rather than mine for it. Granted, there was a real risk of actually becoming addicted to trading cryptocurrencies (a problem that is growing), but somehow the idea just seemed entirely too… normal.
Maybe that was it, and part of the reason for the crypto craze. It’s different. It’s exciting. It has the potential to radically change the way we do things – and already is. It may one day evolve into something radically different than it is today, kind of like how the breakfast cereal Corn Flakes was first created to discourage kids from masturbating. And it still just might break the Internet, at least according to some economists. Perhaps that’s why institutions such as the University of Oregon are spending millions in real money to study cryptocurrencies and digital payments.
My quest to become uber-wealthy via my work laptop had failed. Or, rather, my plans had changed. In researching this project, I read about US$50,000 of cryptocurrency allegedly buried on Everest – literally.
I knew what I was going to do next.
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