The alchemy of bitcoin

Bitcoin is a fantasy.

I did not realize this at first. For years now, I have had only a vague idea that bitcoin is a kind of fake money that people use on the internet. I gathered that it has something to do with libertarians and Silicon Valley and the kind of person who thinks that in 10 years we will all be living on crowd-funded ocean platforms with open-source minarchist constitutions. If I were taking one of those psychological free-association tests and bitcoin came up, the words I would have volunteered might have included "ethics in gaming journalism," "Jordan Peterson," "red pill," and "RonPaulForums.com."

Then, a few days ago, I saw a story about how bitcoin could soon spell the end of electricity in Iceland. Apparently there are so many people "mining" bitcoins in the Land of Fire and Ice that their otherwise remarkably efficient 100-percent renewable power grid is on pace to be overwhelmed. I doubt I would have given even this a second thought if a few hours later I hadn't seen another story detailing how the publishers of Salon are asking the six remaining people who read their website to allow their browsers to be used for bitcoin "mining" in exchange for not having to look at ads.

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What in the (digital) hell is going on here? What does it mean to "mine" for something on your computer? I decided to perform at least an hour's worth of web-based research. What I found left me even more confused.

Like most journalists, I started on Wikipedia. The first thing I noticed was this message at the top of the page: "This article may be too technical for most readers to understand. Please help improve it to make it understandable to non-experts, without removing the technical details." The only people who understand bitcoin are incapable of normal human communication. Imagine that.

The next few websites that I visited, including a quasi-official bitcoin glossary, weren't much help either. As with nerd culture in general, one of the biggest problems for outsiders attempting to make sense of bitcoin is that there is a lot of very confusing jargon. You "mine" a "chain" for "coin" using your "rig," which to me makes about as much sense as heading out to Utah or Colorado in search of quarters hidden inside a necklace or medallion and attempting to extract them with the aid of a fracking platform — except that all of it is taking place somehow inside a semi-automated computer program. Even more confusing, the unearthed coins are then stored in a "wallet" (has anyone ever done that with real-life coins, as opposed to bills?). These wallets can be either "hot," i.e., online, or "cold," away from the internet. How exactly it is possible to get these coins off the computer without trading them for real money is something I was never able to discover.

What does all this mean? As far as I can gather, something like this:

Imagine that in my spare time I compose several hundred thousand riddles. Then I take $200 worth of pennies and put them in a pot, which I hand to a trusted robot. "Hey there, AEDRL-MNES 0093242," I tell him. "Here are untold riddles of my own devising and 20,000 carefully counted pennies. Your prime directive is to pose these riddles to Sailor Moon fans between the ages of 16 and 45 and give exactly one penny to each of them clever enough to solve 1,000 of my brain-busting puzzles. I shall be checking in with you periodically to ensure that your supply of coppers and conundrums does not fall short. Adieu!"

Then try to envision that hundreds of thousands of people around the world actually decided to take me up on the offer without even knowing my name. At first they guessed the riddles on their own, eagerly accepting their pennies and rushing back to bust their brains with another of my devious enigmas. Later, though, they banded together, solving the puzzles in teams and chopping the pennies into hundreds, even thousands of smaller pieces while keeping detailed records of every time any of them ever so much as ventured half a guess or tipped a waitress with 1/5,000th of a single digital cent.

While the (wildly fluctuating) value of a bitcoin is obviously more than a penny, this is the most straightforward explanation I can come up with for the "blockchain." Until two days ago I sincerely believed that this word, which I have seen used by journalists occasionally, was either some kind of automatically generated list of bad accounts on Twitter or a deadly move combination from Street Fighter II Turbo on Super Nintendo. Actually it is another part of bitcoin. The blockchain is an exhaustive online record of everything bitcoin related that has ever happened. Ever. It would be like if there existed some kind of worldwide publicly accessible ledger that detailed every single purchase in the history of transaction-making, from the first Neanderthal trading a mammoth hide for a bundle of sharpened sticks to whatever you and every other person in Los Angeles, Manhattan, Shanghai, and Moscow just bought for lunch.

Why is such a thing desirable? It turns out that the ledger is the whole point. It is there to be "verified" by all the bitcoin users in the world, which is what mining really is. This activity takes the form of a long series of complex computer problems. When you finish solving one, you get a bitcoin of your own. Apparently this activity uses so much computing power that it makes most machines overheat and shut down. I didn't need another argument against going to Salon, but now I have one anyway.

What happens when you successfully acquire a coin? Essentially every other bitcoin user in the world then acknowledges its reality with the aid of their computers. Bitcoin is alchemy, then, an attempt to turn digital lead into e-gold, but it is also cryptography and, it appears, existentialism. "Look at us!" the coins scream into the cold empty vacuum of online space. "We are real!"

This takes us very close to the heart of the matter, I think. One thing I have discovered in the last few days is that if you mock bitcoin in a public forum, people you have never met will contact you in the hope of explaining in language of flatulent self-importance that you are extremely wrong about this very cool and very valuable new currency. Would this ever happen with real money? If I were to tweet "Dollars are for lame-ass nerds with detailed opinions about the third season of Digimon," people might unfollow me out of annoyance, but I doubt that such a statement would elicit numerous impassioned defenses of the integrity and viability of U.S. legal tender.

It's even weirder than that. As I write this, hackers are inventing programs that automatically buy up online retailers' entire stock of computer processors when they go on sale in order to create shortages from which they can profit by selling the units back to desperate "miners" on eBay. People routinely invest upwards of $5,000 on ultra-powerful bitcoin "rigs" in the hope of making $50 a day without stopping to consider the fact that this is also what the guy at their neighborhood Chipotle makes.

Bitcoin is many things: a hobby, a subculture, an internet venture that seems to resemble a pyramid scheme, the code that launched a thousand sub-Reddits (the mixed metaphors are contagious here), a possible ecological crisis in the making. I'm told that it is also the future of everything from banking to insurance to charity and even voting.

I hope the internet is wrong, as usual.