What is Bitcoin Really Up To?

by Ben Jackson 0

The payments industry, government agencies,and the media have all been intrigued by bitcoin because itpurports to be a digital currency that enables anonymoustransactions. Leaving aside the issues of whether anonymity istruly achievable online and the potential uses the currency can beput to, it seems to me that there may be something else going onwith bitcoin.

Aside from buying it with other currencies, the other way to getbitcoins is to “mine” it by running a program on your computer thatrewards you with bitcoins. Articles about the currency describe howenthusiasts have set up rooms full of servers to do nothing butmine bitcoins. But what is happening as that program runs.

Despite not knowing who invented bitcoin-beyond the name SatoshiNakamoto – and thus who wrote the programming, we do know that itis an exercise in cryptography. It is also an exercise indistributed computing. In other words, multiple, decentralizedcomputers are all running the same kind of program to achieve theresult – creating bitcoin.

There are a number of examples of distributed computing, one of themost famous being Seti@Home. What Seti@Home does is use volunteers’computers to analyze data gathered by radio telescopes looking formessages from extraterrestrial civilizations. Individuals candownload the program and it will analyze data from radio telescopeswhile their computer sits idle. So far, they haven’t foundanything.

Could bitcoin be a version of Seti@Home that rewards individualswith tokens for their work? In other words, has the cryptographerwho wrote the bitcoin software created a program that is analyzinga batch of data or working on a computing problem while creatingbitcoins as a side product?

While it could be something sinister, it could also be that thecreator of bitcoin has a massive computing problem to solve, can’tget access to any mainframe supercomputers, and so has created asocial experiment in money that also solves the problem of scarcecomputer resources.

The amount of computing power that has gone into mining bitcoinsis massive. A report from the BBC indicates that the power going into bitcoinmining could power 31,000 homes in the U.S. Also, bitcoin mininghas become sufficiently attractive that hackers have createdviruses to turn others’ computers into slave miners according to Wired.

While there is certainly a potential to make money, there is also apotential to crunch a lot of data and do a lot of cryptography workin a decentralized way. All of this raises the question, is theremore to bitcoin than currency?