The Downfall of Bitcoin: Part 1

Journalist:
Drew Cordell (@DrewjCordell) @DrewjCordell
June 3, 2014

The following is a work of fiction, the events below have never happened. This article serves as a means to stress the importance of mining responsibility on both the miner’s end and the pool owners end by proposing a possible scenario that could become the downfall of Bitcoin. Any companies in the following article are fictional and this story does not pertain to any companies in existence today. The story will be told as a collection of events from several different perspectives on the events leading up to November 17th, 2014.

Disclaimer: All characters appearing in this work are fictitious. Any resemblance to real persons, living or dead, is purely coincidental. Names have been generated with a random Generator.

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10:00 AM, November 5th 2014

[dropcap size=small]J[/dropcap]osh awoke to the sound of his alarm buzzing next to him. He shot up from bed getting up quickly in preparation for the big day. A few weeks ago he had won a big giveaway from Copper Mining inc; he had won the new Omega ASIC mining rig, and it was going to be delivered to his house today. The Omega miner hashed at 10 Th/S, and he would finally be the envy of his friends. His current miner hashed at 80 Gh/S and mining was becoming increasingly difficult. Josh had never cared for any Altcoins and was always focused on getting as much Bitcoin as possible, he saw immense value in the coin that had steadily climbed to over $2,000 in the past few weeks.

Josh walked down the stairs and made a bowl of cereal and a cup of orange juice and sat down to watch the news with his father. Bitcoin was the center of conversation this morning on CNN; there had been many controversial issues with the currency, however, it was gaining traction in becoming a mainstream currency. After all, Every state had at least one Bitcoin ATM now and many had multiple. Josh was able to spend his Bitcoin at the mall with his debit card that used Bitcoin even though many stores already accepted Bitcoin, and he could just pay with an app that was on his phone.

Josh checked his phone to look at the Bitcoin price, it had climbed another $5 since he had sat down for breakfast, he smiled with satisfaction and sipped his orange juice. From outside came the muffled sound of a large motor. The door bell rang, and Josh eagerly ran to it to see if it was his package. The UPS man at the door asked Josh to sign for this and handed him a large box with a sticker of a pickax mining rich veins of copper ore on the front. Josh eagerly flipped open his CRKT Fossil knife and sliced the heavy tape on the box. The knife slid through the tape like it was butter; Josh always kept the thing razor sharp. His father watched as he lifted metal box armored with Styrofoam inserts out of a cardboard box. The Omega miner was black and had copper trimming around the edges giving it an elegant look. Inside the cardboard box, was a smaller bag containing the necessary cables to power the miner.

Josh had already watched several videos on the Omega miner and knew how to operate it. He took out his phone and called up his friend. “it’s here, come over man,” he said to Alan eagerly. “on my way!” Alan said and hung up. Alan had been his best friend for a very long time and the two of them had been fortunate to get into bitcoin before the big boom in 2013, though they didn’t have a fortune, the two of them had acquired over 20 Bitcoin between themselves. Alan pulled up in front of his house in a Honda Accord and ran up to the door. He let himself in without knocking, Josh’s father gave him an annoyed, but playful scowl, “No need to knock, come on in, Alan” Josh’s father said smiling. Alan laughed and waved and walked over to Josh admiring the majestic looking mining equipment on the desk. Josh had just attached the Omega to on the wall and had installed the software remotely to control the mining on his laptop and phone. He would be able to monitor his hashrate, pool rewards and mining wallet address on the go with the Copper Mining app, as if he didn’t check the Bitcoin price enough daily.

Josh plugged the Omega into the wall and watched as green LEDs illuminated the box giving it a spectral glow of elegance. With one touch of a button on the top, the Omega had connected to his Wifi network, and he could see the Miner was connected on his laptop. “You heard about The new Oakmine Pool right?” asked Alan. “Of course! It was even on the news” said Josh. Oak Mine was a new pool started by a wealthy Bitcoin investor. The pool featured -5% mining fees for the first month of their launch. The pool was designed to give people incentive to participate in Bitcoin and even gave out a sign up bonus that was enforced by IP address to people signing up for the pool. Many people had expressed a fear that the pool would grow to popular and exceed 50% of the network, but a quick check of the pool’s hashrate said that it was hashing at 27% of the entire network, a very safe margin to say the least. Alan had been mining on Oakmine since the launch yesterday. Josh quickly setup his account and claimed the .008 BTC sign up bonus which was incredibly generous. After creating his worker, Josh pointed the miner at the pool and watched as the hashrate climbed to 10 Th/S. The Omega let out a quiet hum as the fans spun to life. It was incredibly quiet and didn’t generate much heat at all. Josh and Alan watched with amazement as the Miner began to earn Bitcoin on the pool; the -5% mining fee would net josh a lot of Bitcoin, all he had to do was keep his miner pointed at Oakmine. He would be careful to watch the pool’s hashrate, 51% attacks were possible, and he knew that, but it was unlikely that one could happen with the current difficulty of Bitcoin being so high.

1:35 PM, November 7th 2014

Oakmine made a formal announcement that they would be buying out four very well known, and reputable Cryptocurrency exchanges on the morning of November 7th, 2014. The date of purchase was set for the 17th of November. Danny had read the news on Cryptocoins News like he always did every afternoon after his classes. Oakmine was very reputable and were continuing their sign up bonus and -5% mining fees. Over the past couple of days, they had even purchased mining hardware and were giving investors the opportunity to purchase cloud mining contracts for a very low rate. Oakmine created several videos proving that they controlled the equipment and were not running a Ponzi scheme. Oakmine’s hashrate had climbed to 34% of the network, but it was still nothing to worry about. Though Danny could not mine, he had invested some of his Bitcoin into a mining contract with Oakmine. The news that Oakmine was expanding so soon after their initial launch was incredible. From a business edge, owning four exchanges would give them some control over the price of Bitcoin. The company was registered as a business in Sweden and had the papers to prove it, on top of that; the company was publicly disclosing everything they did, and this seemed like investors trying to develop a large business with Bitcoin.

Oakmine had also announced that their mining fees after launch week would be .25% and that miners mining on the pool would get ‘Oak Points’ to use on the exchanges that would be owned by Oakmine, which would entitle them for entries into drawings for mining rigs, Bitcoin, electronics and more. The Bitcoin community had welcomed Oakmine with open arms and saw it as a company that would help lead Bitcoin into the future and cause rampant economic growth. Since the company launched its mining pool, the value of Bitcoin had already gone up by 5%. Danny continued to read the article and found that Oakmine was purchasing all three exchanges for a sum of 900 Bitcoin. Oakmine was headed by CEO Hector Stephens, who had claimed to be a very early investor of Bitcoin. Everything appeared fine to Danny, and he was happy to have purchased a cloud mining contract from Oakmine, perhaps he would even win a prize from the Oak Points he would be earning very shortly.

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This concludes part one of this story, the story will be broken up to make reading easier as it is a long essay. Once again, the events, characters, and companies (aside from Cryptocoins News, CNN, Money Magazine, and UPS) are all fictitious. This series of articles is not written to slam Bitcoin, I as the author am fully invested in Bitcoin. The purpose of the article will become apparent once you as the reader have finished reading all three parts.

Jump to part 2 here.

Last modified (UTC): June 5, 2014 16:37

Tags: Bitcoin
Drew Cordell (@DrewjCordell) @DrewjCordell

Drew is an undergraduate student at the University of Texas at Dallas, majoring in Business. He is an active member of the Cryptocurrency community, and enjoys collecting, trading, and writing about various coins. Outside of the digital currency world, Drew tends to spend his time with friends, playing video games, or studying.