bitcoin 400 fred wilson

Motherboard, a blog run through Vice Media LLC, was recently given a tour of a bitcoin mining facility in Dalian, a port city in Liaoning Province, northeast China.

The mine, located on the second floor of a repurposed factory, generates 4,050 bitcoins a month, the equivalent of around $1.5 million, according to Motherboard:

“Despite its dystopian appearance, the group’s six mining farms encompass eight petahashes per second of computing power, whose brute force, as of October, accounted for 3 percent of the entire Bitcoin network.”

Bitcoins – a digital currency that can be transferred instantly between two people anywhere in the world – are generated by “mining” them with custom-built computers. Wikipedia compares the process to “a continuous raffle draw [where] mining nodes on the network are awarded bitcoins each time they find the solution to a certain mathematical problem (and thereby create a new block). Creating a block is a proof of work with a difficulty that varies with the overall strength of the network.”

“To put it simply, we’re racing to find an answer on the Internet,” said Jin Xin, Bitcoin Mine Manager, in a video shot during a site visit. “Whoever does the correct calculation will be rewarded. The rewards are bitcoins, a virtual currency.”

At its peak, the Changcheng factory churned out 100 bitcoins a day at each of its six sites, but the group of entrepreneurs is finding that as the level of difficulty and computing power increase, the ratio is gradually changing. The process uses about 1,250 kilowatt-hours of electricity, and the group’s monthly electricity bill is about $80,000. They are currently mining from 20 to 25 bitcoins a day.

The facility has about 3,000 “miners,” which are computers that connect to the Internet and churn out algorithms whose correct queries are then generated an award in the form of a “bitcoin” – which is really just a number associated with a bitcoin address.

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Henry Sapiecha