I’m not really sure how it started, but all of a sudden (past 24 hours) I’ve become very interested in bitcoin.  Not so much in a “I think it’s the future” kind of way, but more a “there’s a lot of interesting stuff going on and it’s a lot of fun.”

I think that sums up how I feel about Bitcoin: it’s fun.  It has all the features of online games: it’s easy to get into, it’s easy to measure your progress, there are infrequent but meaningful bursts of rewards, and you have to acquire increasingly rare and powerful equipment in order to get ahead.

A lot of people are dismissive of Bitcoin, but personally I compare it more to something like World of Warcraft gold than a national currency: there’s a value to WoW gold, even though you can’t buy anything tangible with it and the gold has no fundamental economic value.  Chinese gold farmers might not be the highest-regarded internet citizens, but I haven’t heard the argument that they don’t understand fundamental economic principles when they chase after that virtual currency.  This is even more prevalent in EVE online, where battle losses are regularly reported in dollar figures in addition to ISK (the in-game currency), since the game officially supports dollar-to-ISK conversion (though you can only use the dollars you get through this to pay for your subscription).  In the game you can see how motivated people are to earn ISK; you might not agree with their choice of time and money, but no one is arguing that they’re misguided about trying to earn virtual currency, since the players don’t claim that they do it for real-world economic reasons.

I think a similar analogy can be drawn with gambling: like many of my friends, I can understand the allure of playing EV-negative games-of-chance at a casino (my favorite: Casino War).  Even though I’m not at the casino to make money, I’ll still try to use a money-maximizing strategy, even though this sort of profit-maximization seems at odds with the decision to gamble in the first place.

I think something similar can be said about Bitcoin: it’s incredibly fun to be involved in, and I don’t regret the time + computing cycles I devote to it even though I know it doesn’t make economic sense.  It’s been a lot of fun to learn the bitcoin protocol (technically the Stratum bitcoin-mining-pooling protocol) and see how much performance I can get out of a single Python process.  Who knows, I may even take a look at one of the Bitcoin exchanges, or try to build a bitcoin miner out of my FPGA.  And my goal from all of this will be to get as many Bitcoins as I can, even though I’m definitely not convinced of Bitcoin’s future.

To be sure, there are definitely some people who are making money off of Bitcoin — it seems to be the people profiting off of the Bitcoin enthusiasts, though, rather than the Bitcoin enthusiasts themselves.  From Wikipedia, this seems remarkably similar to the California gold rush: “Recent scholarship confirms that merchants made far more money than miners during the Gold Rush” [1].  A “gold rush” actually seems like a remarkably apt term given the nature of Bitcoin, how people are reacting to it, and the fact that “[m]ost, however, especially those arriving later, made little or wound up losing money” [ibid].

So overall I’d say that Bitcoin is a really neat side project if you have spare time, and on the other end if you’re well-capitalized and have a lot of time on your hands, I think there are ways you can make money.  I don’t think I’ll understand the people in the middle, though, who are small-time players but still decide to invest real money into bitcoin with the only goal of getting more money back.

So what I’m trying to say, is the next couple posts will be about building a sha256 hasher and not about building a processor 🙂