happiness is a warm coin

A Bitcoin is a type of cryptocurrency in which money is represented by an accumulation of agreed-upon virtual coins in a very long accounting ledger.

I’m a miner. Similar to the gold rush days in California in the 19th century, I mine coins using a hardware rig in my apartment. The miner, per se, is a high-end graphics card typically seen in a gamer’s computer—it represents about 70% of the overall cost of everything going on. The coins in this case aren’t Bitcoin but Ethereum, a popular alt-coin, if you will.

The overall process looks like this:

  1. Buy parts for a computer and assembly them
  2. Install some sort of operating system and software to mine the currency you’re interested in
  3. Buy something called a cold wallet on which to safely store your currency and a fire-proof safe
  4. Generate a wallet for the type of currency that you’ll be mining, Ethereum in this case
  5. Generate a receiving address for this wallet
  6. Configure the mining software to use your receiving address
  7. Choose a mining pool (akin to joining a co-op of miners who will collectively mine together and share the profits) and configure the mining software for this group
  8. Configure the mining pool’s interface so that you select how often you are compensated from the monies owed to you
  9. Turn it on, let it run and monitor the progress

Today, I was rewarded with my first pay-out from this mining pool. It’s not a huge sum of money at the moment but I couldn’t be more pleased because I understand about the nature of accumulated interest…

happiness

Reverse Inflation

Fiat currency (dollar bills, for example) suffers from something called inflation. If you’re old enough, you’ve experienced the ever-decreasing value of the dollar when you wish to buy a gallon of milk or some other familiar commodity (whose price continually increase year after year).

According to the Bureau of Labor Statistics consumer price index, the dollar experienced an average inflation rate of 2.09% per year. Prices in 2017 are 42.2% higher than prices in 2000.

Perhaps one of the biggest reasons why fiat currency loses so much value is because 1) it is no longer backed by gold and 2) anytime the major banks feel like it, they just print more of the stuff in a process called quantitative easing. In earlier days, the federal government would have needed to issue bonds to investors and then later to pay off these debt instruments. Now, it just prints more paper currency without fearing the negative effects of doing so.

Now imagine a type of currency which enjoys reverse-inflation, an ever-increasing value instead of a decrease. Ethereum seems to have an average increase of 64% per month in its recent history. Imagine buying a gallon of milk three months ago for $4.00 and three months from now you could buy it for a mere $0.27. Of course, Ethereum might crash completely and be worthless—that’s the nature of something like this. At the moment, though, it looks like something worth maintaining over time.

The Future

It’s difficult to guess what the future holds for these types of currencies. I would guess that the quantitative easing of fiat currency would be enough to erode our confidence in the value of those paper currencies which should translate into people migrating to these cryptocurrency alternatives.