The money-as-a-concept-and-in-reality rabbit hole goes around the world and from pre-history to the future.
I recently took a physical tour of a company with headquarters in Raleigh, North Carolina, satellite operations four hours west of there and a large scale farm in Washington State. There, they make the things that make what very well might be the new paper money – Bitcoin and other cryptocurrencies. After leaving The MiningStore, I did a mental tour into the world of money, value, exchange, and mining. This blog post has been written and scraped several times. What is left, I hope, will provide you with some nuggets about the nature of the digital currency Bitcoin, how it is produced, and finally, why all that matters.
Money hasn’t always been paper. Anthropologists found the earliest examples of metals used to represent value somewhere 50,000 to 100,000 years ago. They believe that groups of humans agreed these metals had a value to solve the problems that bartering couldn’t, like gifting, debt tracking and repayment, or the ability to “make-up” for unequal exchanges.
One metal in particular, gold, has enjoyed the most long-term, widespread adoption as a valued, naturally occurring element that can be used to exchange services and goods. Why gold? It makes sense that a non-corrosive, scarce resource that also took resources to locate and extract would be deemed worth exchanging. If dirt was the unit of exchange, well you can imagine.
Necessity is the mother of invention
Exchanging actual gold became cumbersome, and so some pioneering folks (first in China and then in Europe) printed pieces of paper and said it was representative of the agreed upon, valuable gold. They would store the gold and use the paper for the act of exchanging in its place. Gold became so scarce that the central decision makers decided that they would start printing more paper money. Since the 1930s, paper money is not backed by any rare natural element. Money is printed and its agreed upon value for exchange goes up and goes down.
In the US, it is printed by the Federal Reserve, a more private than public entity whose authority is central and limited to a group of less than twenty. In other countries, governments print money at rates that make it about as common as dirt. We already imagined the issues of dirt being valuable and look at where we are now just one paragraph later…just as in Zimbabwe where hyperinflation had people carrying stacks of money to buy loaves of bread.
Today, even the value of gold is decided by a private organization in London, the aptly named London Gold Market Fixing Company. The value decided is “based on financial evaluations of anonymous auction rounds run every 45 seconds” and is announced to the world twice a day. In summation, today, the value of money, paper or gold, is made up by central authorities and relies on agreement and participation.
So what’s next?
Bitcoin is a digital element that is made scarce by mathematical problems that need the resource of computational power to be solved in order to create it, or as they call it, mine. It was invented to address the issues that sprung from having small groups of people who have private and public connections that would conflict with the interest of citizens, controlling the value of our means of exchange.
Invented in 2009, the year after the world’s largest economic crisis, to address centralized, lawless, problematic paper-printed money, Bitcoin was developed by Satoshi Nakamoto. Satoshi is an unknown person or group of people that released the new currency as an open-source software. That means the software is freely available and may be redistributed and modified. This act of decentralization allows for more digital currencies to be created.
Bitcoin was developed using a public blockchain; a digital ledger that chronologically and publicly records transactions. Instead of a bank keeping records of transfers made, data is stored using a blockchain that is unhackable and decentralized.
Digital currencies using public blockchains, in general, solve all sorts of problems by making the transfer of value faster, cheaper, and accessible. Some refer to this technology as having the power to unbank the banks. Peer-to-peer, verifiable transactions may dominate the financial landscape causing a shift from banks being too big to fail to a time when banks are obsolete.
Universal Trust is Becoming Universal Verification
The adoption and widespread use of digital currencies have the potential to be the most revolutionary of any of the shifts in money agreements. Those who participate in the space either by mining, investing, trading, or building on blockchain platforms, are betting that this will be the next step in the evolution of value transfer.
In some ways, mining is also like voting. It’s saying, ‘I choose and support this system and I trust that this system will one day benefit me. Both in terms of my own wealth generation, like an investment, but also because I want to participate in the creation and direction of this particular system.’ You can also vote by investing in stocks or putting your money in banks. Whatever you choose will further develop that agreement around money.
As JohnPaul Baric (JP), Founder of the MiningStore explains, “The entire cryptocurrency ecosystem revolves around Blockchain technology, and in turn, activity from miners. While some might choose to treat an investment in crypto as investing in a security, investing in mining hardware is the better bet worth taking. The hardware itself maintains value while also giving you the freedom to choose which coin to mine at which time. It’s why we here at MiningStore simultaneously run a large-scale Ethereum mining farm in Washington. We’re seriously behind the idea that mining will provide us the single greatest return on investment possible.” JP is an early adopter and has owned and mined Bitcoin longer than most people have heard of it.
In addition, Rob Walther, who leads IT infrastructure and operations at MiningStore, noted that “we can compare (blockchain) to the Internet. No one owns the Internet. It’s just getting easier for people to interact with it and make money off of it. If this new technology is the way of the future, then there is room for every person or company to find a way to profit off of this and to benefit. The cost of transactions are going to be cheaper and the speed of moving money between us and our family and also to vendors is going to be faster and more secure and trustworthy. Miners are the strangers around the world that are collectively making this new infrastructure possible while generating passive income.”
We are evolving from solving the problem of exchange and moving around heavy metals to solving the problems of centralized concentration of monetary control that has not only burdened us with heavy transaction fees and long wait times, but also with insane amounts of debt and inequality based on barriers to banking and access to credit. Yes, Bitcoin was, indeed, intended to address those issues and if that is something you believe you can get behind, you might want to pick up a miner and start digging.
WATCH: JohnPaul Baric and Rob Walther of the MiningStore define and explain Bitcoin and Blockchain.
NEXT: Follow along while I discuss the technical aspects of mining.