Bitcoin is a topic that most people who spend time on the Internet have heard about. A Bitcoin is not a tangible coin like traditional currency. It is a virtual currency that can be bought, sold and mined electronically. For Andreas Kennemar and Marcus Erlandsson, an idea involving Bitcoins turned out to be beyond profitable.
In the short span of four days, Kennemar and Erlandsson earned $3 million in revenue. How did they do this? KnCMiner, their company, does not actually own the virtual coins or trade them. Instead, they crafted a computer that is designed to mine the currency online. At $7,000 per unit, these computers are certainly more of an investment than the average desktop or laptop. During the second week of November, KnCMiner sold off all of its inventory when Bitcoin prices were skyrocketing. In a record four minutes, the men made an impressive $600,000.
How To Mine Coins
At first mention, the idea of mining a virtual currency may sound like an easy treasure hunt game to the average person. However, the process is very complex. Without the right electronic tools and equipment, mining a Bitcoin is difficult for a regular computer. There are several cryptographic puzzles that must be solved, and the average computer does not have the ability to compute them. This is where the two men who created the mining computers developed their idea. They used a special chip, which is called an Application-Specific Integrated Circuit or ASIC.
To build a coin, a computer has to calculate an encryption problem that is called SHA-256. The graphic card or ASIC does the processing, and the algorithm must be solved in order to create new coins. The process is commonly called solving a block. When a computer is successful in creating new Bitcoins, it will be verified with other processing computers in the network. The first person to solve a new block is the one who receives the coins. Currently, there are 25 Bitcoins per block with a limit of 3,000 per day before it becomes significantly harder to produce more coins.
The idea of this virtual currency certainly provides opportunities for creative people to make money, but some detractors also argue that the system is flawed or unsustainable. If anything, the value of a Bitcoin has certainly proven volatile. Here at “The Official Merchant Services Blog” we’ve covered a variety of aspects concerning virtual currency. We delved into tokenization just recently, which facilitates the processing of payments by creating virtual tokens instead of storing cardholder data in a way that is susceptible to breaches and hacks. We have also covered aspects of micro-transactions and how video games embrace both the concept of virtual currency and the sale of virtual items for real currency. Bitcoin and the ongoing developments in Bitcoin mining takes these concepts to a whole new level of depth and economic intrigue. We will continue to monitor and report on the Bitcoin story as it unfolds.