Two local guys have been mining Bitcoin for a decade. Josie Adams asks them why they still believe – and how they respond to criticism of the environmental impact of mining during a global climate crisis.
In early 2018, buyers at The Strand Arcade on Queen Street had clammy feet. The floor was hot and made a rumbling noise. In a basement under the building, 250 Asic machines with 1,350 watts and a number of Miter 10 pedestal fans were installed in the wall.
The two young and sweaty guys responsible for that downtown Auckland riot were in Bitcoin mining for their seventh year. Carl and Matt * had spent all their money on these mining machines, large rectangular bundles of microprocessors that cost $ 4,000 each. The men didn’t know yet, but they were on the verge of losing all their money – again.
That year, Bitcoin’s price plummeted and its holdings collapsed – from around $ 3 million to $ 125,000. The council kicked her out of The Strand when hotel guests across the street complained that they couldn’t use the microwave. The transformer was half a block down Queen Street.
They had nowhere to go and no money to do anything anyway – but that wasn’t the first, second, or last straw for these two aspiring Bitcoin millionaires.
TNotoriously power hungry Bitcoin is a kind of money, but digital. Bitcoin mining is like gold mining, but instead of hitting picks on rocks, computers solve puzzles. When the Bitcoin network believes the computer has done enough, it rewards it with a Bitcoin block, a large piece of bitcoins. For this reason, Bitcoin mining is also known as “Proof of Work” – the computers prove that they have done some work and receive a reward.
Bitcoin enthusiasts like Matt and Carl believe they can restore power to the people by removing finances from central banks and governments. The first bitcoin ever mined came with a message from its creator, the mysterious Satoshi Nakamoto. The news was a headline that spoke of the purpose of the coin: “The Times January 03, 2009 Chancellor on the verge of second bank bailout.”
It was an ideology a young but already jaded Matt could figure out. He began his career as an apprentice at Goldman Sachs, where he learned how businesses invest and raise funds. “I have an overview of how it actually works and I have come to believe that what they are telling you is not right.”
He realized that the traditional standard for borrowing – that loan money was based on gold – was no longer practiced. “That was all dropped in the early 1970s. A bank doesn’t actually need gold. You can blow up the price and make it up, pretty much. It’s not real
“It increases inflation that is being passed on to the masses, which is not really fair. And that’s where my interest comes from. “
An Icarus bitcoin mining rig. (Photo: Xiangfu, CC BY-SA 4.0, via Wikimedia Commons.)
Matt started mining with his business partner Carl in 2011 after reading about this new “Bitcoin” invention on web forums. “There was something called 4Chan that told us it would cost tens of millions of dollars. There’s a writer named Hal Finney and he said it’s going to be $ 30 million in 30 years. “
IIn the early days – the digital equivalent of a gold rush – each bitcoin block contained 50 bitcoins. It was a great time being a miner if you held onto your profits. But it was the Wild West, and Matt and Carl lost around 70 coins to scams. These would now be worth nearly $ 4 million. They operated from home and bought the graphics cards the internet told them to. Some of them showed up, some didn’t. “We didn’t know what was real,” says Matt.
They thought they had been scammed again when they bought their first Asic – Application-Specific Integrated Circuit – miners, which didn’t show up for nine months. When they finally did, the boys needed a place to house them. A mysterious wealthy benefactor offered them The Strand’s basement in 2018 after hearing their vision for a brave new digital world.
Turning The Strand into the sauna was uncomfortable, but the extremely tangible heat and electricity sucker only bolstered Matt’s belief in Bitcoin as an alternative currency – it was far more real to interact with than some magical numbers on a central bank server. “You need electricity, you need a machine, you need a lot of knowledge about how to dissipate heat,” he says. “It is an actual, physical thing to create the coin.”
This “physical thing” has to be about electricity, and this is where the environmental criticism of Bitcoin comes into play. In March, the power consumption of the Bitcoin mining network was estimated at 129 terawatt hours. That’s somewhere above Norway’s electricity consumption and below New York state’s electricity consumption. But, says an optimistic Matt, the electricity doesn’t have to come from fossil fuels. Their Thai mine uses solar energy, and he believes New Zealand miners have the opportunity to use hydropower.
“Tiwai Point could be a mining town, and we could attract these miners from China and overseas to come here because it has its own hydroelectric power station that supports it.”
The Strand Arcade in 2012, before its hot fate. (Photo: ChewyPineapple, CC BY-SA 3.0, via Wikimedia Commons)
TThree years after being kicked out of The Strand, Matt and Cal remain unstoppable against the immovable object that is the traditional financial system. After the Auckland Council gave them the go-ahead, they set up a 1,200 machine mine in Thailand in 2019. This month they are sending more machines to colder pastures: an old wool mill near Dunedin.
Matt sees the recent mining raid in China as an opportunity for New Zealanders to get involved in the industry. More than half of the world’s bitcoin is mined in China – or it was until a few months ago. “It has scattered the power of mining,” he says. “It gave all of us a chance to start.” Even though the price of Bitcoin and mining equipment has skyrocketed, he says there is still room for offspring.
“Four [gaming] Laptops are worth $ 10,000 – they can make you $ 7 a day, so you can make $ 120 a week if you just sit there. It costs just as much electricity as if it were just turned on. ”As he speaks, a single laptop hums, running a mining program called NiceHash, which he recommends for beginners. Power consumption varies from laptop to laptop, but the types used for gaming (and mining) are generally around five or six times more energy-intensive than a standard lappy.
Matt and Carl have now worked full time setting up an office in the B: Hive of Smales Farm on the north coast of Auckland. Here they have expanded the business by starting workshops and teaching people what Bitcoin is and how to get involved. Right now they’re training residents of the retirement home across the street who want to do more with their savings than buying bonds and Fonterra stock.
They’re also expanding into app development so other companies can get involved in the future of financial technology. They are early adopters of what is known as the “decentralized web” – an internet and an economy powered by technologies like Bitcoin that function without central banks or governments. And they expect the rest of the world to catch up soon.
“We believe there will still be a disruption to the current financial system,” says Matt. “Inflation is going to go up, so everyone thinks they have all the money, but that’s going to have to cost up, and that’s just made up. We believe it will be a huge bubble, and we are in that bubble now. “
With more than 4,000 coins in existence, it’s hard not to think of cryptocurrency as a bubble. Will Bitcoin Survive? Will miners survive? “We believe Bitcoin will be more of a store of value than gold,” says Matt. “Only 21 million will ever exist.” The last bitcoin will be mined around 2140 after over a century of halving the block reward.
Despite all the promises of less power-intensive mining, it still hasn’t happened. And from Matt’s point of view, that’s perfectly in line with Bitcoin’s founding philosophy: work has to be done to get a coin.
* Last name removed for data protection reasons.
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