If you want to make money from gold, you can either become a speculator or a miner. The same appears to hold true for cryptocurrencies like Bitcoin.
While most people are content to try to profit from the rise and fall of Bitcoin, there are those who actually mint the stuff using special cryptocurrency computers.
The rise of Bitcoin has also spawned a number of startups developing services and products in the cryptocurrency space.
Vancouver’s Bitcoiniacs, for example, became the first exchange to open a Bitcoin ATM in North America (in Vancouver), and B.C. startup Bex.io has raised close to $900,000 in venture capital to launch a new software-as-a-service platform that helps with the creation of Bitcoin exchanges. HootSuite founder Ryan Holmes is among the investors.
Meanwhile, a group of local cryptocurrency enthusiasts has incorporated a new company called Crypto Think Tank that builds and sells the chassis for special computers used to mint Litecoin, Dodgecoin and other scrypt-based currencies.
“We started as a group of miners seeing the potential in the particular market,” said Xin Lou.
He and partners Nick Ngo and Eric Liow started investing in Bitcoin and then got into mining. Cryptocurrencies like Bitcoin are “minted” using special computers that have no other function. The “coins” are created when the computer solves increasingly complex algorithms.Bitcoin mining is typically done with ASIC mining machines, which are expensive, and therefore a barrier to entry for hobbyists.
“They’re very small, they’re very efficient on energy, but they’re very, very expensive,” Liow said, “and there’s a wait line to get it.”
Litecoin and other scrypt-based currencies use a different kind of problem solving, and the computers used to mine them can be cheaper.
But they use a lot of power, generate a lot of heat and can even be a fire hazard, which is one of the issues Crypto Think Tank addresses with its Riggit V9 chassis.
It reduces heat in the computers – which run continuously – by increasing airflow through an open design (the guts of the computer are not enclosed) and by allowing for graphics processing units to be more spaced out.
The company just started selling the Riggit V9 through NCIX, a Canadian online computer parts distributor with distribution throughout North America. The Riggit V9 sells for $100.
Number of cryptocurrencies in circulation hits 100
There are now 100 crypto currencies, with a total market cap of $11 billion, according to coinmarketcap.com. Recent high-profile failures by exchanges that lost millions to hackers have fostered fears of a Bitcoin crash – something that has yet to occur.
Mt. Gox, a Japan-based Bitcoin exchange, lost US$460 million to hackers, and more recently an Alberta Bitcoin exchange, Flexcoin, was also forced to shut down when hackers stole 896 Bitcoins worth $600,000.
Though Bitcoin’s value sank from $800 to below $500 after the Mt. Gox hacking, it has rebounded and last week was in the $650 range. With a market cap of US$8.2 billion, Bitcoin remains the most valuable cryptocurrency.
Ryan Fugger, the Kelowna developer who came up with the protocols behind Ripple – the second most valuable cryptocurrency – said the problem is not with Bitcoin, but with the exchanges themselves.
“People who have been following Bitcoin for a long time see this as a good sign,” Fugger said. “The bad actors are being weeded out. The bad actors can fail one at a time, and the whole network can remain strong. That’s the whole concept of the Internet of decentralization, and I think this is it working.”
Canada has, to date, taken a hands-off approach to Bitcoin, and, according to Bex.io co-founder and CEO Jesse Heaslip, that has helped Canadian companies like his take root.
But last month the federal government announced it will introduce anti-laundering legislation for virtual currencies like Bitcoin. Some regulation may not be all bad, Heaslip said.
“The downside to a deregulated environment is that it kind of withholds the mainstream players because they don’t know what the rules of engagement are. For Bitcoin to come full circle and be a real mainstream tool, it needs some level of regulation.”
Heaslip added that he hopes the government doesn’t go too far with regulation, which might stifle start ups like his.
