Alex Waters, an early bitcoin developer and entrepreneur, was COO and CIO for the bitcoin exchange startup BitInstant. Waters started several Bitcoin companies and has been at the forefront of efforts to improve compliance.
In the second entry in CoinDesk’s “Bitcoin Milestones” series, Waters talks about the early escalation in an arms race to mine Bitcoin and remembers what was lost in the process.
I didn’t take the Bitcoin whitepaper seriously when I first read it in late 2009.
It wasn’t until a few months later that I thought, ‘Wow, this is starting to take hold’. I saw someone swap bitcoin for pizza on the forums. It was great, but I didn’t really understand what was happening.
At that point, my engagement was very relaxed. I remember thinking if I got bitcoins maybe they could pay for a new computer in a few years …
But Bitcoin wasn’t like anything I’d seen before. It got my imagination and I was hoping that one day it would be discussed outside of forums and IRC chats.
Soon it started to happen. I put my hat on, met the locals in the saloon and started working on the blockchain.
I started looking for Bitcoin Gold using the standard client. At the time, most people were generating bitcoins by running the v0.3 bitcoin client on their computers in the background (a curious notion by today’s standards).
I made a few coins and I loved it. I liked it so much that I spent a lot of time researching the mechanics of Bitcoin. I immersed myself in the understanding of computer science. (That served me better than any mining industry in the long run.)
I am occasionally asked if I am a “Bitcoin millionaire” because I was an early miner, but the answer is no. The early miners I knew traded thousands of coins for the value of a new video game.
Most of the people I spoke to on IRC were mining, but few of the discussions were about the value of a bitcoin. Gavin Andresen, the project’s first supervisor, even went so far as to give away tons of bitcoins for free to kickstart the movement.
Soon, however, the parameters of mining would change.
Mining proved to be a dynamic system with larger unknown actors who had the tools and resources to outperform me. Even after realizing this, I decided to keep mining. Mainly because mining was fun. I enjoyed the process of learning and improving – but knew I couldn’t keep up.
The history of Bitcoin mining would go through several phases.
CPU mining began in 2010 when Bitcoin was slashdotted and a small crowd started mining with the Bitcoin Core client. Then there was pool mining.
But the big change was the advent of GPU miners in late 2010 and their total dominance – the decimation of the CPU mining quota. (GPU mining would eventually become useless when the first ASICs shipped).
During these movements there was a group of people within the Bitcoin community called miners. I like to think that I am part of this group, along with others who are passionate about Bitcoin.
However, it is probably more appropriate to refer to this group as “local miners”.
I say local miners because we were a bunch of hobbyists, mom-and-pop businesses. We have been displaced by the industrial mining of large corporations.
As in other markets, economies of scale have ruined us …
In retrospect, it’s easy to say that only capitalism was at work here, and one could argue that it was better for the network as a whole.
But I’m making an exception with this idea. Bitcoin mining wasn’t just about making money for me (I didn’t make a lot anyway). It was about being part of the Bitcoin ecosystem as a contributor, as a voice among many, as a kind of crypto-democracy.
Mining bitcoins made me feel like a part of the movement more than anything. I was there every step of the way and was captivated from CPU to ASIC.
Somehow I even inherited one of the first two ASICs (greetings to Yifu Guo, Jeff Garzik and Charlie Shrem). It stares at me as it collects dust and reminds me of how I got to where I am today.
By creating bitcoins, miners are useful as a bulwark against wrongdoing: when bitcoin was a government, miners formed a branch that prevented others from gaining too much power.
For me, one of the greatest moments in Bitcoin history was the advent of GPU mining and the excitement within the Bitcoin community that created it. That is what fascinated me about Bitcoin. From working with core development to working with various Bitcoin companies, it all started with mining.
GPU mining was when the beat for the Bitcoin universe waned …
But I still loved that moment when CPU mining was the essence of Bitcoin – as Satoshi and many of us saw it. Over time, it turned out that when the system switched to the GPU, it was prone to oligarchy. Maybe it was inevitable.
I still believe that something can be done to recapture crypto-democracy.
We are mainly a group of people on the internet trying to find and create value together. We know what Bitcoin is like with the current state of centralized mining, and I think we can improve it.
Sure, the economics of mining has changed. The jump to the GPU made sure of that. But mining is about more than just money.
Be a local miner, bitcoin still needs you.
This article is dedicated to my friend and brother in Bitcoin, Jake Dienelt.
We will miss you.
Row of bitcoin miners via Shutterstock