When bitcoin first appeared on my radar in the early summer of 2012, it was already three years old and had a small but dedicated cult following. Back then, one bitcoin was worth roughly $5 but rumors hinted at unlimited growth.
When I mentioned bitcoin to my husband, a software engineer and all-around technophile, he laughed. He said it was a fad that wouldn’t last, and we shouldn’t waste our time or our money. Usually, he has impeccable instincts about these kinds of things.
As that summer transitioned into fall, the talk around bitcoin ramped up. Advocates and early-adopters were busy posting about it on social media. There was chatter about early transactions, including a pizza purchase that cost the buyer 10,000 bitcoins. That would be worth more than $200,000,000 today. A few mainstream media outlets mentioned bitcoin once or twice and when the first bitcoin documentary came out, my husband finally had to admit something interesting was happening. We jumped on the small but growing bitcoin bandwagon.
Bitcoin is the original cryptocurrency. In some ways, cryptocurrencies are like stocks — intangible financial assets traded through exchange markets. The value of an individual unit of cryptocurrency, or coin, is established by the market. Coins are worth what consumers are willing to pay based on market value.
Unlike stocks, cryptocurrencies are largely unregulated, decentralized and untraceable, in part because they are secured and verified using cryptology, the science of encoding and decoding data. New coins are added to the market through mining, which involves a sophisticated computer solving a complex math problem. The first computer to solve the problem is rewarded with a block of coins.
Rather than exchange dollars for cryptocurrency, my husband and I opted to build a small mining computer. The idea was that even if we didn’t find any coins, it would be an interesting experiment and a great learning opportunity. And we could resell the computer components later to recoup some of our costs.
Our mining computer consisted of a three-tier aluminum shelf from a hardware store that housed 12 high-end gaming graphics cards, the workhorses in this process. However, one of the downsides to mining cryptocurrency is power consumption. To be effective, you must mine constantly, 24-hours a day, every day. Even a small mining computer consumes a significant amount of energy.
We mined for a few weeks without any luck. With every passing day, the computer consumed more power with zero return. It didn’t take long for us to realize that a small machine like ours was already obsolete in the growing bitcoin market. So, we pivoted and started mining altcoins instead.
An altcoin is any cryptocurrency that’s not bitcoin. It turns out, anyone with enough interest and the right skill set can create an altcoin, and many people have. As of this writing, there are more than 5,000 altcoins on the market. New altcoins are usually easier to mine and cheaper to buy. Most are initially valued at a fraction of a dollar.
The first time we found a block of altcoins, it was like winning a very small lottery. We jumped for joy. But, like all technology, cryptocurrency changes fast. After a few months of mining altcoins, it became clear that the cost of small-scale mining outweighed the benefit. It had become cheaper and easier to buy crypto. We decided to sell our mining computer and use the proceeds to buy coins.
Since then, we’ve made a few good trades and a lot of bad ones. We’re still curious about the market and we’re watching intently to see how things play out. It’s exciting and we want to participate, but we’re also acutely aware of the risks involved. The market is still largely unregulated, and the value of individual coins is determined by supply and demand. Because humans are fickle by nature, things can change quickly and without warning. Some investors have made millions or billions of dollars, others haven’t been as lucky. And, unfortunately, scammers and schemers run rampant in this kind of environment.
On May 13, something bad happened. A wildly successful and heavily traded altcoin called Luna collapsed. It quickly dropped from an all-time high of more than $100 to almost zero. This had a ripple effect on the entire cryptocurrency market. Investors across the board have suffered significant losses.
The cryptocurrency market is still young and volatile and we’re all still learning. Personally, I think it’s here to stay. There’s a lot of opportunity for financial gain but there’s also a lot of risk involved. My best advice for now is to be curious but tread lightly. And, as the saying goes, never put all your eggs in one basket.
April Godwin is an IT administrator who lives in Lakebay.
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