[Politico article] What aspects of the bitcoin boom are covered in this article? In what ways do the bitcoin mining towns resemble boom towns in other examples of rushes to riches?
[NY Times article] Discuss the following quote from this article: "The paradox about Bitcoin is that it may well turn out to be a genuinely revolutionary
breakthrough and at the same time a colossal failure as a currency." What, according to this article, might be the effects of Bitcoin on economic and other realms?
Bitcoin miners are flocking to places with cheap energy sources to create their bitcoin mines. These places consist of rural towns usually built near dams with empty warehouses that can be recreated for bitcoin purposed. The Mid-Columbia Basin ended up being a prime spot with its cheap electricity and cool, dry weather which helped the servers to not overheat. These places ended up generating so much energy that conflicts with locals arose, as the miners were maxing out local electrical grids. The miners were trying to gain bitcoins by using bitcoin mining computers which solve mathematical codes by making billions of guesses a second to try to guess a block’s numerical password. Once these problems are solved, bitcoins are received in return. This resulted in the people creating these bitcoin mining operations to ultimately get rich fast without having to do much work after setting up the computers. Eventually as mining costs rose, bitcoin value started to drop, but only for it to eventually rise again in spring of 2016. Then investors from all over, including Wall Street, tried to get in on shares which was probably a contributing factor in the bubble that occurred later on. This Bitcoin booms reminds me of other towns who have discovered a valuable resource such as coal and exploited it to become rich, except in this case, the areas they are “exploiting” would just be areas with cheap enough energy that they are still able to make a profit.
ReplyDeleteThe aspects of bitcoin that are covered in this article include the use of computers to “solve a complicated math puzzle to win a stack of virtual currency,” the use of large amounts of electricity needed for such problem solving, the idea of finding cheap places that could handle large quantities of electricity. It is also mentioned that as miners gain more computing power the network automatically adjusts making the sequence, or “password”, more random thus making it so more computing power is needed in hopes that this process will in turn keep the network alive after its halving.
ReplyDeleteThe bitcoin mining towns resemble boom towns in the way that they are in a sense being used. People are moving to the Mid-Columbia Basin to profit off of their cheap electricity and run down business to make into bitcoin industrial mining dens. Not only was the cheap electricity a perk, miners also used the temperament of the basin to their use. Cool winters and dry air helped reduce the need for air conditioning which prevented their servers from overheating.
The article covers what goes into bitcoin mining and what miners look for in an area. Computers must solve complicated math puzzles and equations to be rewarded with bitcoin. This takes a lot of computer and server power as well as electrical power. Miners look for areas where electricity is cheap, and the climate is ideal for their hardware to run optimally. People would set up these mining operations in locations that fit these specifications in hopes that they will make lots of money.
ReplyDeleteBitcoin mining resembles traditional mining by creating "boom towns," exploiting them of their resources, and then moving on. There are even land disputes between miners over several people farming a certain area and depleting resources such as server space or electricity, mirroring the land disputes over other resources such as oil and coal. When bitcoin miners have drained an area of its resources, they will move onto a different one, just like traditional miners.
The article discusses the creation of bitcoin mines that essentially allowed miners to gain more bitcoins through using computers that solved difficult mathematical codes. When the codes were solved, miners received bitcoins. The computers though require large amounts of electricity. In order to have enough electricity to run these systems, miners moved typically to more rural areas where electric was cheap. This become problematic for locals however because the miners would use up all the electricity, sometimes even maxing out local electrical grids. These bitcoin boom towns remind me of most boom towns. People flock to a particular area because there is something there that they wish to gain or will help them obtain either more resources or money and then typically expend the resource, and then leave the area with negative consequences. An example would be the gold rush. Gold diggers would come to states like California with the hopes of getting rich quick, much like the bitcoin miners, use up the gold resources and then leave, leaving the area damaged.
ReplyDeleteBitcoin mining resembles patterns of boom and bust seen in other forms of commerce in other towns in that people flock to an area because they want to move up the economic ladder. They do this by mining bitcoin with high powered computers capable of solving complicated problems needed to mine bitcoin. Like other boom towns, resources are quickly depleted in towns where bitcoin mining is popular. Electricity in particular is used in excess to run the computer systems needed to mine bitcoin. As stock rose and more and more investors latched onto bitcoin mining projects, the bubble was created similar to how bubbles have been created on Wall Street and beyond, through a pattern of mass-production that leads to burnout and economic failure.
ReplyDeleteThe bitcoin mining boom brought with it a huge demand for large amounts of cheap power. This led many miners to seek out communities much as East Wenatchee, Washington, where large hydroelectric dams produced a large surplus of affordable electricity. This was needed to power large scale bitcoin mining operations which would eventually use enough power to light up 2/3s of Los Angeles. As the price of bitcoin surged amatur bitcoin mining became profitable leading to many people starting small-scale operations within their homes, causing problems for the area's ill-equipped powergrid. Eventually the local demand for power due to mining meant that entire Mid-Columbia Basin no longer had a surplus of power to export. However, as local demand increased the demand from the rest of the west coast decreased meaning that the Basin's utility companies became relient on bitcoin mining, an inherently volatile commodity.
ReplyDeleteIn the article, it discusses several aspects that go into Bitcoin mining. Bitcoin mining which is the process of large super computers/servers that are solely dedicated to solving large block chains in order to receive the end goal, that of Bitcoins themselves. Another aspect that the article discusses, is the rigorous selection of where these bitcoin mining facilities might be established. The factors that usually go into this selection, vary from weather, cost of local energy, and smaller communities where there is much less chance for them to be interfered with. The main factor covered within the article though was cost of power, since the power nessisary to run such large warehouse size endeavors takes massive amounts of energy. So bitminers look for places that have either hydro power or extremely cheap geothermal power, such as there is in Iceland. In my own research I even discovered that a Chinese bitcoin mining company set up a large number of bitming warehouses in Mongolia, where they also use the cheap cost of geothermal power that is provided there. Bitcoin mining in many ways takes similar approaches that one might see in the early stages of the “Oil Boom” and how those companies looked for certain communities to establish there desired goals. Which in turn lead to massive economic boost to those once small economies in those communities. This is very similar to what we see with Bitcoin mining currently. However, if the past is the best predictor for future outcomes, then I would say that once the Bitcoin boom starts falling; we will see the same effects on communities based around the business. Communities like the “Black Diamonds” we saw on our field trip earlier in the semester.
ReplyDeleteFinding the right location to put cheap power to work; people needed space for a few hundred high speed computer servers, and also for heavy duty cooling systems as trillions of calculations mined bitcoin. Old fruit houses were the best mining sites. Douglas and Grant share orchards and farms field stories with mines of every size; related to Cargo containers, backyard sheds, and industrial facilities. Outsiders are eager about cyryptocurrency this winter. Local cyrptocurrency enthusiasts believe cryptocurrency will make them personally wealthy, but the fuel of technology revolution, well-paid jobs, and tech-fueled help flow "gilded knowledge." Nakamoto (the currency's creator) built the system for the blocks to be difficult to mine as more computer power flowed into the market; the bitcoin market automatically adjusts solution criteria for random guesses at passwords. He was making miners invested in long-term survival of the network.
ReplyDeleteEarly in the article, Johnson points to early technology inventions that exist but in advanced and better iterations of their original selves (like email and the security it has now, or the inventor of the World Wide Web excluding protocol for mapping our social identity). This NYT article shows that while some might not be convinced of cryptocurrencies' value to society currently, it will surely have lasting historical affects. Advances in software, cryptography, and distributed systems could help with dealing with "corrosive incentives of online advertising", monopolies of online companies (like Google, Amazon, and Facebook), and even international meddling with providing misinformation to disrupt American politics. So far the only mainstream usage of blockchain technology is Bitcoin, but other cryptocurrencies are trying to compete before a possible bubble burst–to which afterward, it is unsure what blockchain technology will be used for. Bitcoin itself is a furthering of the peer-to-peer system that became popular in the late 90s and into the 2000s before piracy laws and internet regulations made it more difficult to share data illegally; Bitcoin utilizes the system in a legal way while still not requiring any centralized authority to verify transactions.
ReplyDeleteBased off the quote from the NYT and the last two articles, bitcoin and other cryptocurrencies could very well be the next big thing in the economic world, but could also yield some catastrophic results at the same time. In the Times article, Johnson interestingly points out how the scholars have summarized the foundation and beginning of bitcoin mirroring that of the internet. A variety of side projects that's slowly beginning to culminate with collective interest from more and more people. Additionally, the evolution of bitcoin may appear to be moving slowly, but the foundations of the internet had been decades in the making, resulting in interweb powerhouses such as google, amazon, and facebook, begging to wonder if cryptocurrency is heading in similar direction. On the other hand, as viewd in the first article, bitcoin could potentially ruin the lives of many. The hype and mania of bitcoin and other cryptocurrencies is rather similar to the same kind of mania that has surrounded past economic catastrophes. Situations in like the boom town in Eastern Washington could yield the same results as past boom town busts such as Ordos, China. The mass gathering of outsiders to consume a finite resource could greatly affect the lives of local residences, even more so if a fall out occures.
ReplyDeleteBitcoin is a revolutionary breakthrough in the sense that it created a database without anyone being in charge and that compensated individuals for making the database more valuable by defending it from attackers and monitoring all transactions. Although Bitcoin is a breakthrough in of itself, it can be considered a failure as currency. Their is not always a consistent flow of currency due to the need to solve math problem like puzzles to get bitcoin. In addition to getting bitcoin through these puzzles it is ensured that bitcoins will grow increasingly harder to earn over time to ensure the scarcity of the earning in the system. This may also turn to a failure due to the fact that over the last five years (in 2018) the value of bitcoin had increased exponentially making early investors rich and thus making it unstable and an energy drain. Bitcoin may have effects on other realms as well. Bitcoin may have made a breakthrough in technology that can potentially tackle “today’s digital problems” such as online advertising and misinformation campaigns through cryptography. Bitcoin seems to also have offered the ability to rid of the model of capitalism that is winner takes all.
ReplyDeleteLike all other booms, this new form of currency that is bitcoin is exciting to people because it is unknown and mysterious to some. But like other booms, the more people that invest and get involved in this cryptocurrency, the more the recources in that area will soon be depleted and could very well become another bust. Already the power needed for this bitcoin mining technology is taking up needed power from large cities. This instability in resources and power make it difficult for the computers to solve the mathematical codes needed for mining bitcoin. Though in some cases this could be a benefit, as more demand means more profit.
ReplyDeleteBitcoin is thought to be colossal failure as a currency because it has increased 100,000 percent since its beginning which makes it an unstable form of payment. Its value has also fluctuated greatly over time. Creating new bitcoins has turned out to be a difficult process as computers need to crack codes in order to create more, and this process gets more difficult over time. Bitcoin has proved to revolutionary because it did prove that you could create a database that isn’t controlled by any individual and in that case, is more private. This allows individuals to be more protected from hackers. Bitcoin can contribute to the flow of the economy because in a sense, it has become more of a commodity than a form of currency that investors can either make or lose a lot of money from.
ReplyDeleteThe internet was launched with nothing but good intentions to build a decentralized system of communication, and cryptocurrencies may have begun in a similar vein in the attempt to build a currency without a centralized controller like a federal bank, but just as the internet could not avoid the formation of monopolized control by the forces of google, facebook and amazon, cryptocurrencies likewise quickly attracted all kinds of ill-intentioned charlatans and grifters, who feed off of the complex, hard-to-understand nature of the currency, overinflating what it is worth and will be worth for the sake of attracting investors, then riding the wave and getting out while the getting is good, before the wave crashes. Yet, cryptocurrency advocates argue that they are the solution to the problem the internet now faces with rampant identity fraud, since the decentralized ledger cannot be faked. The cryptocurrency’s public ledger, they further argue, is a model of how to get out of the situation where private corporations make money off of your identity by selling information about you. Cryptocurrency, in this sense, is an egalitarian and public mechanism with the potential to fight the harms of private market interests, but it is still too speculative to say anything certain about its true value, which may depend on the functions that it will take on, from healthcare information sharing to actual buying and selling of goods.
ReplyDeleteThe bitcoin rush reached its peak last fall, where the currency that had been around for years shot up in value nearly everyday. College students, the middle class, and even big time investors of all walks began to throw money at the currency that's value seemed to be going nowhere but up. This was a sort of boomtown in of itself, as millions rushed in while the gettings were good. Unlike a boomtown, however, there was no real, physical material to be found. Just a collection of complicated algorithms and calculations. As the NYT article emphasizes, the mania surrounding bitcoin is quite similar to the type that has led to many of history's greatest crashes. While bitcoin, surprisingly to some,never plummeted significantly during its height of popularity last fall, it is still dangerously unpredictable.
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