Chen Yixin is a typical "miner" of the virtual currency bitcoin in China, joining the trade in 2010. As the boss of a digital products firm, Chen owns over 40 "mining" machines, which generate some 1 million yuan (US$164,000) of income a month for him, without taking account, however, of the heavy investments required, including 5,000 yuan (US$821) of power a day and the cost of mining machines, at several thousands or tens of thousands of yuan each.
Chen's business offers one a glimpse into the bitcoin frenzy sweeping the internet world, most notably in China, as the absence of regulation has created fertile ground for this kind of investment, which now borders on unbridled speculation.
"It's virtually a gamble, which can make you ecstatic, but the ecstasy is tinged with uneasiness," admitted Chen.
The virtual currency has reached a level beyond the wildest imagination of players at the beginning, as it has become an instrument good for transactions on Taobao, China's foremost e-commerce website, and even for purchasing real estate in certain areas of Shanghai, with its unit price having topped 8,000 yuan (US$1,300).
Bitcoin is based on a set of encrypted codes and produced through a complicated computing method before being put into circulation after an electronic signature is added. The total amount of bitcoin has been preordained and it is increasing at a steady rate, aiming to peak at 21 million units by 2140.
Records of bitcoin transactions have to be kept in a shared database known as the "block chain", and every transaction has to be broadcast to the block chain; mining bitcoin is the process by which a "miner" contributes his computing power to process a group of these transactions — a block — which occurs about once every ten minutes. Miners are then rewarded with bitcoins. Mining the currency requires a lot of investment in terms of manpower and electricity resources. The more processing power that is contributed to mining, the more difficult mining becomes, to maintain the rate of one block every ten minutes.
"You have to join the mining operation as early as possible, since it will become increasingly difficult," Liu Tao, a bitcoin specialist, told Chinese-language Legal Weekly.
With a rapid increase in the number of people mining, the yield has been decreasing, prompting some to switch to "knockoff" virtual currencies, such as FTC and CNC, the mining of which is easier, although prices are much lower. Many are adopting a hit-and-run strategy, in sharp contrast to the faith of bitcoin loyalists in the future of the virtual currency. Chen Yixin worries that the trend may turn bitcoin loyalists like him into a minority and thereby undermine the future of the virtual currency.
Chen Yixin 陳一新
Liu Tao 劉濤