Welcome to the world of cryptocurrency!
So what the hell is that?
In 2008, a guy called Satoshi Nakamoto published a paper to a fairly obscure corner of the internet regarding a new way of thinking about currency. He called his idea Bitcoin, and launched a piece of software which people could download and run to both get these “Bitcoins” and support the network. The idea was to remove the anchors and influences which make regular currency a slave to the people who have the power to control it. Much to everyone’s great surprise, it has flourished, and today just 1 bitcoin is worth $1000, to the people who want them – and this is a number which is growing.
In layman’s terms, it’s a currency which is independent of banks, governments, standards based on so-called valuable materials (such as gold) and, most importantly to many, personal identity – it’s as anonymous as you want it to be.
Who makes it?
You do. It’s generated (up to its maximum – more on that later) by a process called mining.
WTF is mining?
It’s a process whereby your computer’s computational power is set to work on solving difficult mathematical problems, which contribute towards validating everybody else’s work. In other words, it’s a transaction system. Your computer goes to work validating the transactions of other miners, who are in their turn validating yours. These problems are measured in “blocks”, and each block is a summary of all the transactions which took place up to this point. The reward for solving the block is coins (there are many coins – again, more on this later), and they have real value. The basic concept is of a self-sustaining network (i.e. the miners) which holds its own value, independent of any real-world influence (except perhaps the cost of electricity!).
I don’t geddit…
TL;DR: You can download a program, put in the values you’re told, and it’ll make you money. While you do nothing. Sounds nice, right?
Can’t be that simple…
Well, it’s not. You need a certain amount of technical know-how, which you can find pretty easily online. You also need to set up various accounts in various places to perform trades from one coin to another. Then you need to figure out how to cash in and out – not as easy as it sounds, unfortunately. Finally, you need to not mess up. Which is the most difficult part of all. This is currency speculation, every bit as real as the currency markets you’re familiar with from that boring bit on the news. You hear of some hothead losing $100 million in a bad decision? Same can happen to you, except probably on a smaller scale. And if you’re smart you’ll only be risking what you can reasonably afford to lose.
So it’s free money, right?
Nope. It’s money you work for. At the basic level you’re offering a service. Your computer serves as a node on the network which plays its part in validating transactions. It burns electricity while doing so, and will probably tie up your computer to the point of being unusable in the meantime – there is a real-world cost. There is a dividend of course – you get coins. There are many, many coins, and a lot of them will be worth nothing. Happily, there are resources out there which can help you choose what to mine. But remember – this is real life. It may be the virtual world, for want of a less cheesy expression, but it’s actual money, if you know how to extract it.
Cool! Count me in!
Well, wait a sec. The purpose of this blog is to outline my personal strategy when it comes to cryptos (that’s the shorthand – I’ll use it a lot), and I hope that it helps you. However, I’m not an agony aunt or a tech-support agent. You can follow what I do, but bear in mind – I will INEVITABLY fuck up. And when I do I’ll lose some money. And if you’re following me…well, you get the point. Also, I’m going to be making assumptions all through this. I like to think I have a certain amount of tech expertise – it’s not a lot, but I can install a graphics card, build a machine, play about with driver versions, and I understand the basics of command line operators and command line operating systems like Linux. You don’t NEED to know these things, but not to put too fine a point on it, if anything goes wrong you’re buggered. You’ll end up paying someone to fix it and that seriously cuts into what you’re making.
But it’s free money, I’ll be a millionaire in a month!
You won’t. Not by a very long chalk. The returns we’re talking here are small. Depending. If you’re in a situation where you can go immediately spend $10,000 on hardware, this is the wrong guide for you. Hit the serious Bitcoin forums, where the big money is. But I’ll be operating on a return of between $10 and $50 per WEEK. From this I’ll need to subtract several things:
Electricity – did you know a powerful computer can pull 1000W per hour? That’s a unit on your electricity bill, or depending on where you live, $0.10 – $0.30 per hour. You’ll be running this thing 24/7, so you can expect your bill to go up significantly.
Depreciation – This is the word given to a process whereby you take your working devices and calculate how much value they lose in a year. You’re running graphics cards (GPUs) at their maximum for weeks on end – eventually you’ll burn one (or more) out, or at the very least reduce their lifespan. You paid real cash money for em, so this is a real cash money cost.
Time – It’s not quite a sit-back-and-roll-in-the-hoard business. You need to watch what you’re doing, and watch it closely. You’re mining CoinA and it’s been doing well. All of a sudden some whale with millions of it dumps on an exchange and drives the value down to approximately sweet-fuck-all. Bye-bye hours of mining. You need to expect this, and trade accordingly. Once again, that’ll be covered in much greater detail in my actual posts.
OK, so why should I bother?
Well, read on…That’s what this journal is all about. You can watch me flounder, triumph, whinge, sink, float, mess up, bitch, rage, gloat, boast, and experiment. But most of all, you’ll see it in detail. I’m verbose by nature, and this is my pet obsession. If you learn something, yay! If you make some money, woot! If you think I’m a moron, fair enough – flame away! But I’ll try not to write rubbish, and I’m pretty confident that the Net won’t let me – kinda like a transaction scheme – you guys validate my gibberish, and I validate yours 😉