What exactly is all the noise about with Bitcoin Mining? – Ridgway Record

RIDGWAY--Over a dozen residents attended the Ridgway Township Supervisors meeting on Tuesday evening to voice their displease over the Pin Oak Energy Partners site in the township that is being used as a Bitcoin mine. But what exactly is all the noise about? When it comes to Bitcoin, the short answer is that its complicated.

Bitcoin was conceived by a person or group called Satoshi Nakamoto, a pseudonym listed on the original 2008 Bitcoin white paper describing how the cryptocurrency would work. On Jan. 3, 2009, Satoshi mined the first Bitcoin block on a simple personal computer with a standard central processing unit or CPU. In 2010 the first Bitcoin mine was produced that used the power of a Graphics Card or GPU to speed up the task. Then in 2013, the Chinese Company New Cannan began a Bitcoin mine using an application-specific integrated circuit (ASIC) that has now become the industry standard for Bitcoin miners.

Now for the complicated part. Bitcoin mining is the process by which new bitcoins are entered into circulation. It is also how the network confirms new transactions and is a critical component of the blockchain ledger's maintenance and development. "Mining" is performed using sophisticated hardware that solves a computational math problem. The first computer to find the solution or get to the closest answer to the problem receives the next block of bitcoins. The miners are acting as auditors, confirming that each Bitcoin transaction is legitimate and valid, thus guaranteeing the "value" of the Bitcoin.

What is a Bitcoin? It's a 64-Digit Hexadecimal number or Hash in Bitcoin terminology.

0000000000000000046fcc608cf0130b95e27d158463e9f967ac56e4df598bc

The number above has 64 digits and contains not just numbers but letters of the alphabet. The decimal system that is accepted throughout the world uses factors of 100 as its base, which means that every digit of a multi-digit number has 100 possibilities, zero through 99. The decimal system is simplified to base 10, or zero through nine in computing. By using a "Hexadecimal," this math incorporates a base 16 with "hex" and "deca" derived from the Greek words for six and ten. In a hexadecimal system, each digit has 16 possibilities. Our standard numeric system only offers ten ways of representing numbers (zero through nine). The Hexadecimal system has to add letters; specifically, A, B, C, D, E, and F, to represent 11 through 15. Software developers and system designers widely use hexadecimal numbers to provide a human-friendly representation of binary-coded values. Each hexadecimal digit represents four bits or binary digits, also known as a nibble. In other words, the Hash above has 64 digits, with each digit representing 16 possibilities, for each of the four digits in the nibble.

Besides the coins minted via the "genesis block," which was the first block created by the founder Satoshi Nakamoto, every other bitcoin came into being because of miners. Because the rate of bitcoin "mined" is reduced over time, the final bitcoin won't be circulated until around the year 2140.

To earn new bitcoins, the company needs to be the first miner to arrive at the correct answer, or closest solution, to a numeric problem. This process is also known as proof of work (PoW). No really advanced math or computation is involved, despite the belief that miners solve complicated mathematical problems. In a way, that's true, but not because the math itself is complex. The computational power of trying to be the first miner to come up with the 64-digit hexadecimal number, or Hash, is basically guesswork. The answer, or closest number, is how a transaction with Bitcoin is verified and ensures the legitimacy of the cryptocurrency.

In a way, its a matter of randomness, but with the total number of possible guesses for each of these problems numbering in the trillions, it's incredibly tedious work. And the number of possible solutions only increases with each miner that joins the mining network. To solve a problem first, miners need a lot of computing power. To mine successfully, they need to have a high "hash rate," which is measured in terms of gigahashes per second (GH/s) and terahashes per second (TH/s). The enormous amount of electrical power necessary is the primary "cost" of Bitcoin mining, besides the cost of the hardware itself. The Bitcoin miner needs access to large amounts of cheap electrical power to be profitable. This is where energy companies like Pin Oak come into play.

Using the generators at its natural gas drilling platform in Ridgway Township, the Bitcoin miners have access to a dedicated power source at a very reasonable rate since they are directly at the power generating site. The generators at the site are not providing power to the electrical grid in Elk County or even Pennsylvania, but exclusively to the Bitcoin mine. With the entire process being handled remotely over the internet, there is no office building on-site or staff that have to be paid to live in the area. The money that is being produced using Elk County natural gas resources does not enter into the local economy at all, besides the natural gas drilling fees and the initial payment to the owner of the site from Pin Oak. And as neighbors and the Ridgway Record have discovered, it is almost impossible to get in contact with anyone to provide any answers from Pin Oak or the Bitcoin mining company, which is so far undisclosed.

Why is such a complicated system in place at all in rural communities all across the county and the world? Because it is incredibly lucrative. Currently, there are approximately 21 million bitcoins in existence with around 19 million in circulation, for a total that only keeps increasing, of roughly $1.3 Trillion dollars. As of March 2022, the price of Bitcoin was about $39,000 per bitcoin, which means a miner will earn $243,750 (6.25 x 39,000) for completing a block.

With new technology, there is always a certain portion of time that is needed for society, regulations, and the legal systems to adjust to new challenges, and right now, rural communities across the world are having to break new ground to regulate these massive uses of power and resources by people and companies that have almost no presence in the communities they are using as hosts. Time will tell if the Bitcoin mines, which generate enormous amounts of waste heat and greenhouse gases, are relegated to the dustbin of history, in the same way as coal-powered electric plants, or if they can manage to find the balance between profitable operation and acceptance in the rural landscape.

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What exactly is all the noise about with Bitcoin Mining? - Ridgway Record