Bitcoin already has miners and every day it gets more into our lives
Kazakhstan It is a mining country. It produces coal, iron, manganese and has the largest uranium reserves in the world. And it is also a power of the call cryptocurrency mining which is the way the process is called computer validation of these assets. More than 18% of the capacity to encode cryptocurrencies is found there, according to the Cambridge University Bitcoin Electricity Consumption Index (CBECI). Is he second country behind US who owns the 35,4%. The decision of the Kazakh authorities to cut off the internet during the recent social unrest caused a decrease in mining capacity of 2.2%.
from China from ban mining and use of cryptocurrencies. Until then, the Asian giant concentrated 46% of the activity. Companies like BIT Mining, one of the largest dedicated to cryptocurrency mining, moved to Kazakhstan and are now evaluating migrating to North America.
But what is cryptocurrency mining? It’s basically a way of secure digital transactions. In the analog world, when a person gives a good or service to another, something physical or an activity is transferred: gold, money, titles, knowledge, care… But in the digital world, when a file is sent, it remains in the original device and also reaches the receiver. Therefore, a system that guarantees that ownership has been transferred and which of the two files is the real one. This authentication is performed by the system ‘blockchain’.
This system is a gigantic accounting book where the operations carried out with cryptocurrencies are registered and encrypted to protect security and privacy. ‘Blockchain’ is a distributed database, which means that it is scattered over the net and does not depend on anyone in particular. Every time a block is completed, where a limited number of transactions can fit, someone must close and validate it, and this process is known as mining. This consists in that the block asks for a code to be able to close and has the form of a math problem whose resolution guarantees its integrity. Whoever discovers the solution first gets a reward, in the form of cryptocurrencies. The process is called mining because the discovery of the key is reminiscent of the discovery of gold.
Bitcoin, the most famous of the cryptocurrencies, was created on October 31, 2008 by a person or entity using the pseudonym Satoshi Nakamoto. It was born from a message to a crypto list that described “a new system of electronic cash». Until December 2010, Nakamoto and other volunteers shaped the platform and created the first nodes where the first bitcoins are mined.
When bitcoin was born, mining could be done with a simple home computer from home. in august 2014, the size of the file with bitcoin transactions occupied 20 GB (gigabytes). Early 2020, had multiplied by 10 until the 200 GB. Today, it is still possible to do amateur mining with very powerful graphics cards, but those who are dedicated to large-scale professional mining must resort to special equipment such as those manufactured by the firm china Bitmain, which has taken the 90% of the market for these machines. With the pandemic and chip shortages, delivery times are months behind.
Currently, cryptocurrency miners are closing a block every ten minutes and the fastest to solve it keeps the new coins that are put into circulation. The activity has been professionalized and there are international symposiums on the subject. There are entire industrial buildings full of computers, dedicated to mining cryptocurrencies.
Electricity consumption is not negligible and this has awakened the critics of environmentalists. The energy consumption is very high because the processors reach high temperatures and must be cooled. This has caused many crypto mining facilities to choose extreme latitudes – in Northern Europe or Russia – to settle. They are also attractive countries where electricity is cheap or easy to steal.
since in 2011 some digital activism groups began to receive donations in cryptocurrencies, its acceptance as a means of payment has been growing. Last Thursday, Elon Musk announced that his company Tesla will accept trades in dogecoins, which caused an increase of 8% in its value. The creation of Bitcoin Cash in 2017 gave it an additional boost. Today there is 22 bitcoin ATMs in Barcelona and 15 in Madrid. The GBTC company has just opened three offices in Madrid where they sell ‘merchandising’ and carry out cryptocurrency trading operations.
This growing acceptance as a means of payment is behind the chinese decision to prohibit operations with cryptocurrencies, since it had become a way to get money out of the country without having to comply with official exchange controls.
However, cryptocurrencies are in fashion not so much because of their value as a means of payment as because of the attempt to turn them into a safe haven asset like the dollar or gold and that has become a highly speculative behavior. When bitcoin was born, four units were needed for every cent of a dollar. That is, the change was a dollar for 400 bitcoins. Today, one bitcoin is valued at $49,900 (37,600 euros). Its volatility is very high: in the course of 2020 it touched historical maximums exceeding 67,000 dollars in November, but it marked minimums of 29,789 in July.
Daniel Lacalle, chief economist at the fund manager Tressis, views the behavior of bitcoin with some skepticism. “People have entered it speculatively”, it states. Question its value as currency. “In the end it is not a countercyclical asset, but rather it behaves quite procyclically.”
This notion that the public is taking cryptocurrencies as securities to speculate on is quite widespread among market pundits. His feasibility as a means of payment it is mortgaged by the decisions made by the central banks in the short term. Most plan to digitize their own coins soon –the euro, the yen or the dollar– and China has already announced the digital renminbi.
Joaquín Casasús, CEO of Abante, agrees with Lacalle, but admits that cryptocurrencies cause him “mixed feelings”. “From a rational point of view, It is a bubble that at some point will burst, but I see things different from other bubbles: for example, an asset that has fallen more than 40% of its value has never recovered and bitcoin has had a dozen falls of more than 50% and some of 80% and has returned ».
Casasús points to a very relevant question. “There is a lot of talent. very smart people behind cryptocurrencies. It is a very powerful ecosystem. That makes me doubt what I see. Maybe they’re right.” However, he agrees on the same point as Lacalle: both fail to see the advantages of the bitcoin system over (conventional) fiat money once the central banks abandoned the gold standard.
But like most experts, Lacalle and Casasús believe that things are changing radically with the system ‘blockchain’ who is behind cryptocurrencies. This system makes possible the Non Fungible Tokens (NFT) that are popularizing digital art or the acquisition of goods in virtual worlds such as Facebook’s Metaverse, Decentraland, Sandbox or Blacktopia. A whole parallel world that is knocking at our doors.