Greg schvey bitcoin a bunker in Iceland, powerful computers are whirring 24 hours a day — and extracting an invisible currency. The company behind the operation relies on cheap energy to turn processing power into cash.
On the flat lava plain of Reykjanesbaer, Iceland, near the Arctic Circle, you can find the mines of Bitcoin. To get there, you pass through a fortified gate and enter a featureless yellow building. After checking in with a guard behind bulletproof glass, you face four more security checkpoints, including a so-called man trap that allows passage only after the door behind you has shut. These computers are the laborers of the virtual mines where Bitcoins are unearthed. Instead of swinging pickaxes, these custom-built machines, which are running an open-source Bitcoin program, perform complex algorithms 24 hours a day. If they come up with the right answers before competitors around the world do, they win a block of 25 new Bitcoins from the virtual currency’s decentralized network.
The network is programmed to release 21 million coins eventually. A little more than half are already out in the world, but because the system will release Bitcoins at a progressively slower rate, the work of mining could take more than 100 years. Bitcoins are invisible money, backed by no government, useful only as a speculative investment or online currency, but creating them commands a surprisingly hefty real-world infrastructure. Emmanuel Abiodun, 31, founder of the company that built the Iceland installation, shouting above the din of the computers. We cannot risk that anyone will get to them.
Abiodun is one of a number of entrepreneurs who have rushed, gold-fever style, into large-scale Bitcoin mining operations in just the last few months. All of these people are making enormous bets that Bitcoin will not collapse, as it has threatened to do several times. If the system did crash, the new computers would be essentially useless because they are custom-built for Bitcoin mining. Miners, though, are among the virtual-currency faithful, believing that Bitcoin will turn into a new, cheaper way of sending money around the world, leaving behind its current status as a largely speculative commodity. Most of the new operations popping up guard their secrecy closely, but Mr. Abiodun agreed to show his installation for the first time.
An earnest young Briton, with the casual fashion taste of the tech cognoscenti, he was a computer programmer at HSBC in London when he decided to invest in specialized computers that would carry out constant Bitcoin mining. The computers that do the work eat up so much energy that electricity costs can be the deciding factor in profitability. There are Bitcoin mining installations in Hong Kong and Washington State, among other places, but Mr. Abiodun chose Iceland, where geothermal and hydroelectric energy are plentiful and cheap. The energy required to run these computers is huge, and has led to criticism that Bitcoin mining is wasteful, not to mention socially useless. The operation can baffle even those entrusted with its care.
Helgi Helgason, a burly, bald Icelandic man who oversees the data center that houses the machines, said that when he first heard that a Bitcoin mining operation was moving in he expected something very different. Since then, the education he has received about Bitcoins has been enlightening, but only to a point. I can’t say that I understand it. Until just a few months ago, most Bitcoin mining was done on the home computers of digital-money fanatics. But as the value of a single Bitcoin skyrocketed over the last few months, the competition for new coins set off a race that quickly turned mining into an industrial enterprise. Greg Schvey, a co-founder of Genesis Block, a virtual-currency research firm. You are talking about order-of-magnitude jumps.
The work the computers do is akin to guessing at a lottery number. The faster the computers run, the better chance of guessing that right number and winning valuable coins. So mining entrepreneurs are buying chips and computers designed specifically — and only — for this work. 20,000 each on the open market.
Abiodun prides himself on using renewable power, at least in Iceland. Abiodun first heard about Bitcoin mining in 2010, he thought it was a scam. Satoshi Nakamoto, it was initially little more than a tech world curiosity. As early users connected their computers into the network, they became a part of the decentralized infrastructure that hosts Bitcoin’s open-source program. Abiodun’s opinion of Bitcoin changed in January, when he saw the price rising. He installed a free application on his home computer that linked him into the Bitcoin network and set it to mining, harnessing the power of his graphics card, which is the part of a normal computer best suited to doing the code work. Abiodun’s computer was in the guest room of his house in southeast London.
Working at HSBC during the day and tinkering with his Bitcoin system at night, he realized if he wanted to make any money, his computer would have to run around the clock. The constant computing, however, overheated the graphics card and pushed the computer’s exhaust fans into overdrive. When he added another graphics card, then a new computer, the room became too noisy for guests to sleep, and the windows had to be kept open to release the heat. That did not make his wife, Gloria, who was pregnant at the time, very happy. I did offer to put her parents in a hotel, but that didn’t go down well. Abiodun’s wife finally gave him an ultimatum — either the computers had to go, or he did. At the same time, he was making money, and friends were asking if they could invest in his mining operation.