Bitcoin, the cryptocurrency powered by a decentralized peer-to-peer network of computers, has been hot this season. With the exchange rate bobbling around US $100, those involved in creating new bitcoins—and upholding the network that makes them valuable—have become locked in an arms race of sorts, seeking new, powerful machines that will enrich them but could also destabilize the nascent virtual money.
Bitcoins exist only as records on a virtual ledger that’s shared over a global peer-to-peer network, each node of which must agree to changes in the accounting—payments or receipt of payments. Arriving at this consensus takes massive amounts of computing power.
You can use your bitcoins even if you’re not plugged into the network that runs the operation, but there is a strong incentive to help out. At an average of once every 10 minutes, the software spits out a handful of newly minted bitcoins to one computer, as a kind of lottery payment to the people (referred to as “miners”) who run it. The way you enter this lottery is by solving “hashes,” trivial functions that reformulate meaningful data sets into unique strings of letters and numbers. Each time a computer completes a hash, it’s as if it has filled out another lottery ticket, choosing the numbers and hoping they match up. Only a specific hash will be accepted, and the first computer to find the right one gets the prize.