To make money in a gold rush, you want to be selling the shovels. In the current gold rush, those are digital however. I’m talking about Bitcoin of course, which is close to $1000 again after the big drop before the holidays. Every hour, 25 new Bitcoins can be mined, except there is no real excavation taking place. Instead, the Bitcoins are awarded to whoever first solves a complex math problem, puzzles that become increasingly difficult over time. The mining/puzzle solving is done with computers, early days a good graphics chip was enough, but now it is more common to pool computing power with others or buy or build a dedicated system. Bitcoin mining hardware sets you back anywhere from a few hundred dollars all the way up to tens of thousands. But at the current exchange rate, even the most expensive rig needs to deliver once or twice to give a return on investment. Of course, as more miners join and compete for new Bitcoin, increasingly the profits will be made by those who sell the rigs, rather than the miners themselves. Same as every gold rush in history, why would digital be any different?
Selling Shovels in a Gold Rush
13 January 2014 | Per Strömbäck
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