Someone introduced me to bitcoin in the winter of 2013, when it’s price was equally under a cold spell, worth roughly $50 per token.
Promising to “embarass” me with a free bitcoin’s gift, the fellow seized my tablet, installed an offline wallet called Mycelium, and smiled.
“It’s exciting”, he shouted before my bemused face, with enthusiasm.
“Try it. You should try it. Bitcoin is the future.”
He was keen to get me started. But he hardly got any cheer from me.
His bubbly spirit couldn’t be held back though. Bitcoin had swept this guy – let’s call him John — off his feet.
And trying desperately to hide the ignorance, my mouth involuntarily muttered something, inaudibly.
“I have stumbled upon some news articles on this subject (bitcoin).”
The disconcertment of being beaten to emerging financial instruments by some climate change geek is something of a big deal to a career business journalist.
So, I started the journey, researching and reading lots of literature on this experimental digital currency.
Why would anyone in their right senses want to replace our beloved notes and coins with a currency that’s not even real money: intangible, invisible and controlled by nobody. Money that only computers and cellular phones could store?
Supposing to have gained some critical understanding on the concept behind bitcoin — and, it should be said, for fear of being left behind — I decided to prove my newly found knowledge.
Earlier this year, I bought 0,445 bitcoin on the local exchange Golix.com for around $2 250, using proceeds from a sale of my small investments on the Zimbabwe Stock Exchange, where I had incurred a bit of losses.
At first, had grovelled at John’s feet — who, by the way, never fulfilled the promise of the free bitcoin gift – trying to get him to sell a tiny fraction of his large bitcoin holding to me, at a more “friendly” price.
It didn’t happen.
“You will have to place bids on the exchange,” John advised, in his usual ‘geekish’, but jovial demeanour.
My initial skepticism was in part due to my lack of familiarity with cryptocurrencies at the time.
But largely because bitcoin seemed like a fad.
I had followed bitcoin closely since my awkward ‘intiation’ back in 2013, watching its price shoot from just $50 to $1 000, then $ 3 000 and more, in a matter of months.
Predictions were bullish, with some guiding it could hit between $100 000 and $250 000 by 2020, as the currency entered the mainstream, attracting big money investors.
Pyramid schemes, particularly those played online promising big payouts, retain similar ephemeral characteristics, growth rates and projections. Or so I thought.
By now I had understood that if you couldn’t get enough money to buy bitcoin on exchanges like Golix.com, where it trades at a massive premium, you need to earn bitcoin in a way not easily understood, but nonetheless effective: mining.
Quickly I spread my little bitcoin investments, buying retail mining contracts from institutional miners Hashing24 and Dragon Mine, extracting bitcoin, and two other crptos — expanse and ethereum — at a very small-scale.
The returns come in pretty slow, and small, depending on the size of one’s contract, which starts at $25. So, one needs to exercise a bit of patience, avoiding the short-term grab and dash philosophy.
Over months, or years, it is possible to have accumulated a good number of coins, for a tidy profit. I am still looking forward to this profit!
To understand bitcoin mining, it is important to first understand how bitcoin works.
The technology behind bitcoin is a complex one. Put simply, the system rounds up transactions by investors into what are known as “blocks”, to be solved by math — the so-called blockchain technology.
To do this, one needs very powerful computers to work out a solution whether the transaction was possible. This is what is called bitcoin mining, often a capital and energy intensive process run by a few companies.
Once the other “miners” confirm the solution, the transaction goes through, with “miners” earning bitcoin for their sweat.
It is difficult for individuals to mine bitcoin because of the top-end mining equipment needed to do the work. Yet, not impossible.
But individuals can pool their resources together to mine under one roof, as is at Hashing24.com.
Ever since bitcoin surged above $10 000 on the global market a few weeks back, I have got to admit, I have been checking my wallet with increased frequency, starring at the rapid growth in my investment that now stands at a few thousands of dollars.
There are times I have been fretful, when bitcoin’s rally seemed like a bubble headed for the biggest burst in history.
A series of splits this year, giving birth to Bitcoin Cash and Bitcoin Gold, had initially been seen as bad for bitcoin, impeding its acceptance and intended mainstreaming into different economies. But none of this has happened.
Instead, bitcoin has scaled the psychological $17 000 point, and tested $18 000 when an American exchange launched bitcoin futures trading a week ago.
The futures trading – essentially a bet on the future price of bitcoin solemnised by a contract — is all that bitcoin advocates have been looking for: acceptance as a bonafide financial instrument, a defined asset-class.
But earlier assertions by its creators for using bitcoin as a faster, realiable means of exchange, much in the same way as fiat currencies, is quickly losing style.
With the current rate of increase, noone is willing to spend the digital currency – holding it in anticipation of a higher return in future.
At Golix, bitcoin this week touched $30 000. Many are now trying to move in, with huge bids recorded.
The continued increase in the price of bitcoin — a 160 percent rise in the past 30 days — looks unsustainable going forward. The virtual currency is now primed for a correction.
Either way, the craze will have someone smiling all the way to the bank, and yet, another crying.
Invest responsibly. Stay safe.