Bitcoins, The Economist says, have three useful qualities in a currency: they are hard to earn, limited in supply and easy to verify. But stability is important too: just over a year ago a bitcoin was worth four times as many dollars as now. The Mt.Gox affair and the recent problems at Bitstamp show that the Bitcoin economy still has many threats to face.
The media tend to report only the huge swings of Bitcoin price (and, recently, the fact that it always seems to go down). But these are not the only aspect of the Bitcoin story, and not the most important, as we have often said on CCN. The Economist confirms:
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“The price collapse and the exchanges’ woes do not tell the whole story, though: increasing numbers of businesses are accepting payment in bitcoin, including Time Inc and Microsoft; and whatever the fate of bitcoin, the technology may spawn a range of alternative crypto-currencies and provide the basis for other businesses involving such things as the transfer of assets.”
The article underlines the importance of providing incentives to the Bitcoin users who maintain the blockchain, and predicts that, with the decreasing profitability of mining, transaction fees will become the main incentive.
Now, mining is big business. Individual home miners have given way to large operators that invest substantial money in mining farms in far away places with low temperatures and low electricity costs, and it can only be expected that the trend toward professional mining will continue.
“Like other energy-intensive industries such as smelting aluminium, minting bitcoins is more efficiently done at scale, and in places where electricity is cheap and reliable. It also helps to be somewhere cold, to reduce the cost of cooling the machines. KnCMiner’s hangar is near the Arctic Circle and right next to a hydroelectric dam.”
Of course, large-scale mining has environmental impacts, and if only a few large operators maintain the blockchain, then the stability of the Bitcoin system is threatened by 51% attacks. These factors will play a role in the more and more professionalized Bitcoin mining industry.
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