After having been given $1,000 by his grandma at only 13-years-old, Erik Finman, now 17, made the risky decision to invest in the notoriously volatile Bitcoin market.
When he was 15, only a year and a half later, he liquidated his Bitcoins, making a cool $100,000. He’s now crowdfunding his very own VR headset. He has been featured in Time Magazine, Mashable, CBS News, Business Insider, The Times, BBC, and more.
I get this question a lot. Today, I was asked to write an answer at Quora.com, a Q&A web site at which I am the local cryptocurrency expert. It’s time to address this issue here at Lifeboat.
I have many PCs laying around my home and office.
Some are current models with fast Intel CPUs. Can
I mine Bitcoin to make a little money on the side?
Other answers focus on the cost of electricity, the number of hashes or teraflops achieved by a computer CPU or the size of the current Bitcoin reward. But, you needn’t dig into any of these details to understand this answer.
You can find the mining software to mine Bitcoin or any other coin on any equipment. Even a phone or wristwatch. But, don’t expect to make money. Mining Bitcoin with an x86 CPU (Core or Pentium equivalent) is never cost effective—not even when Bitcoin was trading at nearly $20,000. A computer with a fast $1500 graphics card will bring you closer to profitability, but not by much.
The problem isn’t that an Intel or AMD processor is too weak to mine for Bitcoin. It’s just as powerful as it was in the early days of Bitcoin. Rather, the problem is that the mining game is a constantly evolving competition. Miners with the fastest hardware and the cheapest power are chasing a shrinking pool of rewards.
The problem arises from a combination of things:
Of course, with Bitcoin generally rising in value (over the long term), this provides continued incentive to mine. It is the only thing that makes this game worthwhile to the individuals who participate.
So, while it is not impossible to profit by mining on a personal computer, if you don’t have very cheap power, the very latest specialized mining rigs, and the skills to constantly tweak your configuration—then your best bet is to join a reputable mining pool. Take your fraction of the mining rewards and let them take a small cut. Cash out frequently, so that you are not locked into their ability to resist hacking or remain solvent.
Related: Largest US operation mines 0.4% of daily Bitcoin rewards. Listen to the owner describe the effiiency of his ASIC processors and the enormous capacity he is adding. This will not produce more Bitcoin. The total reward rate is fixed and falling every 4 years. His build out will consume a massive amount of electricity, but it will only grab share from other miners—and encourage them to increase consuption just to keep up.
* Several readers have pointed out that they have access to “free power” in their office — or more typically, in a college dormitory. While this may be ‘free’ to the student or employee, it is most certainly not free. In the United States, even the most efficient mining, results in a 20 or 30% return on electric cost—and with the added cost of constant equipment updates. This is not the case for personal computers. They are sorely unprofitable…
So, for example, if you have 20 Intel computers cooking for 24 hours each day, you might receive $115 rewards at the end of a year, along with an electric bill for $3500. Long before this happens, you will have tripped the circuit breaker in your dorm room or received an unpleasant memo from your boss’s boss.
Bitcoin mining farms —
This is what you are up against. Even the amateur mining operations depicted in the bottom row require access to very cheap electricity, the latest processors and the skill to expertly maintain hardware, software and the real-time, mining decision-process.
Philip Raymond co-chairs CRYPSA, hosts the New York Bitcoin Event and is keynote speaker at Cryptocurrency Conferences. He sits on the New Money Systems board of Lifeboat Foundation. Book a presentation or consulting engagement.
Some market observers worry the solutions to problems the new technologies offer might become the causes of other problems. With AI gathering steam and large amounts of data flowing to empower machine learning, how to protect privacy in a region where the use of personal information is loosely regulated has become a pressing question.
Filing taxes using blockchain in Indonesia. Growing better crops in Vietnam with artificial intelligence. Sending rockets into space in Singapore. Southeast Asia is quietly emerging as a breeding ground for new technology.
The attack on Rockport is one example in a rising tide of similar invasions of municipal systems across the U.S.—from major cities like Atlanta, which got hit in March, to counties, tiny towns and even a library system in St. Louis. Local governments are forced to spend money on frantic efforts to recover data, system upgrades, cybersecurity insurance and, in some cases, to pay their online extortionists if they can’t restore files some other way.
Hackers are targeting small towns’ computer systems, with public-sector attacks appearing to be rising faster than those in the private sector. Online extortionists demand bitcoin ransom in return for decryption keys.
It seems that Microsoft isn’t done experimenting with blockchain technology.
Microsoft and Ernst & Young (EY) announced the launch of a blockchain solution for content rights and royalties management on Wednesday.
The blockchain solution is first implemented for Microsoft’s game publisher partners. Indeed, gaming giant Ubisoft is already experimenting with the technology.
Early adopters, speculators and Geeks are never sufficient to bring a new paradigm to market. Mass appeal and adoption of a mechanism that requires education and a change of behavior is never ‘fait accompli’—until it reaches a tipping point. Once at the tipping point, it can go viral without a structured PR campaign and with risks tied only to technology and scalability.
What about early adopters? Can they drive mass adoption?
Somewhat, but not much beyond market awareness. Generally, early adopters drive mass adoption only for evolutionary inventions. For example:
But some inventions are different. Their use requires that users become acquainted with a technology or process that they didn’t realize they needed! [continue below image]…
The telephone and the Internet led to radical changes in the way we work and interact. You might think that the benefits of a telephone were obvious, even in 1876—and that adoption was driven only by cost and speed-to-market. But this is not the case. When the phone was demonstrated between two cities in Massachusetts, everyone was already aware of Alexander Graham Bell’s clever new gadget. But few people wanted one. A New York Times reporter scoffed that investors were wasting money, because the invention would be of little use to consumers and businesses. It didn’t occur to him that instant, ubiquitous communication (using a device that requires only a voice) would change the face of emergency services or allow close relatives to live far apart without wondering what happened to each other. He wrote that it was a rich man’s toy, useful only for hearing a voice from down the street.
What is required to shift Bitcoin into the mainstream?
Right now, only a small fraction of individuals believe that cryptocurrency presents an improvement over fiat (money issued by a government or bank). Most people don’t yet understand (or accept) that it is backed by something far more tangible than Dollars or Euros—or that it is more fair, or less susceptible to theft and manipulation. And because of spectacular press coverage, many people believe that it facilitates tax evasion, drug deals or worse. There are more misconceptions. For example, realizing that Bitcoin is open source, some individuals feel that other cryptocurrencies could improve on it, and displace it without recognizing the equity of past stakeholders. And finally, many individuals suspect that governments will ban it or issue their own crypto, making the whole issue moot.
Everything in the above paragraph—except the first sentence—is a false perception. But mass appeal and adoption is greatly retarded by false perception.
The adoption of cryptocurrency by mainstream businesses and consumers (not just as a payment instrument, but as the money itself) requires a series of events that are largely predicated on a recent past event. Think of this process as a row of dominos tumbling down—each one falling into the next domino.
The dominos have already started to fall. The process is slow, and it requires a few technical fixes related to cost, scalability, and ease of use. But they are falling and it is becoming clear that secure, decentralized, transparent cryptocurrency will replace nationally minted currencies all over the world. For some influential individuals, this is frightening, impossible or too radical. But this change is inevitable, because the cat is already out of the box and because the benefits to consumers, business and government are almost overwhelming
What are the ‘falling domino’ events and will they occur?
They are listed in the first article below—and, Yes—they are already occuring.
Philip Raymond co-chairs CRYPSA, hosts the New York Bitcoin Event and is keynote speaker at Cryptocurrency Conferences. He sits on the New Money Systems board of Lifeboat Foundation. Book a presentation or consulting engagement.
The question was asked of me as columnist at Quora.com: Will governments eventually ‘approve’ of cryptocurrency? First let’s agree on terminology…
A blockchain-based cryptocurrency that is open source, permissionless, capped, fast, frictionless, with a transparent history—and without proprietary or licensing restrictions is good for everyone. It is good for consumers; good for business; and it is even good for government.
Of course, politicians around the world are not quick to realize this. It will take years of experience, education, and policy experimentation.
Many pundits and analysts have the impression that shifting to cryptocurrency—not just as a payment instrument, but as the money itself—will never be supported by national governments. A popular misconception suggests that a cryptocurrency based economy has these undesirable traits:
Over time, perceptions will change, because only the last entry is true. Adoption of cryptocurrency puts trust into math rather than the whims of transient politicians. It helps governments avoid the trap of hoisting debt on future generations or making promises to creditors that they cannot keep—Yet, it does not lead to the maladies on this list.
But, what about that last item? Does an open source currency cause a nation to lose control over its own monetary policy? Yes! But it is not bad! Crypto cannot be printed, gamed or manipulated. Despite perception, it is remarkably resistant to loss or theft. Early hacks and fiascos were enabled by a lack of standards, tools and education. As with any new technology—especially one that changes practices or institutions—adoption of radical processes goes hand-in-hand with gradual understanding and acceptance of benefits.
How Does Crypto Help Governments?
Adopting/accepting a national (or international) cryptocurrency is a terrific way for governments to earn the respect and trust of citizens, businesses, consumers and especially creditors. There is no more reason for governments to control their money supply than there is for them to control communication networks, space travel or package delivery services.
You may not agree that cryptocurrency is good for government, and so I expand on the topic here. But your question doesn’t ask if it is good, it asks if governments are likely to approve.
Yes. Eventually…
First, a few forward thinking countries like Iceland, Japan or UAE will spearhead adoption of a true, permissionless cryptocurrency (or at least recognize it as legal tender) . Later, ‘stress-economies’ will join the party: These are countries that need to control either rampant inflation, a reluctance to tax citizens, treasury mismanagement or massive international debt. A solution to these problems requires restoration of public trust. I wouldn’t be surprised to see Greece, Zimbabwe, Venezuela or Argentina in the mix.*
Eventually, G7 countries will tread into a growing ocean. Not now; but in 5 or 8 years. The conditions are not yet right. It requires further vetting by early adopters, continued development, education and then popular consumer adoption. But all of these things are inevitable. Eventually, governments will recognize that a capped, trusted, transparent, math-based money is far better for all stakeholders than money based on intrinsic value, promise-of-redemption or force.
* We are not discussing countries that plan to create their own cryptocurrency. None of these plans involve a coin that is open source, permissionless, decentralized and capped. They are simply replacing paper with a national debit card. But it is not crypto.
Philip Raymond co-chairs CRYPSA, hosts the New York Bitcoin Event and is keynote speaker at Cryptocurrency Conferences. He sits on the New Money Systems board of Lifeboat Foundation. Book a presentation or consulting engagement.
