Mining rigs, pools and shares: The bitcoin hobby ecosystem
The professional end of the spectrum includes massive server farms with specialized hardware that are mining to make real money. These tend to be in cold places because the hardware runs so hot. You can actually buy "mining shares" in some of these companies that allow you to access a portion of the coins they mine. I don't know the credibility of these operations and have not met anyone who has bought a share.
At the lower end of pro, you can buy hardware from a company like Butterfly Labs, which Kane has used from a learning perspective and says works.
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Again, bitcoins over time get progressively harder to mine and the electricity costs of mining can approach or surpass the coins that you mine. So I'm uncertain if mining can be profitably done at this point.
You can see there is a lot here. It strikes me that this is an investable market from the hobbyist, education, and entertainment angles, beyond the investment and exchange angles. I'd be curious to know the number of hobbyist in the space but judging from the volume of message boards it must be significant.
The interest in bitcoin is such that a some innovative hacker even figured out a way to create an app that lets you load the bitcoin price and chart onto your Pebble watch. I couldn't resist and loaded it up myself:
The risks in the bitcoin market are clear and we see new ones each day, such as the FBI holding $130 million in bitcoin that it could dump. However, on the other side, we see major financial institutions making bets on it as well, such as news that Fortress might be starting a bitcoin fund.
(Read more: Bitcoin endorsed by top hedge-fund manager)
The intellectual excitement and great many bitcoin hobbyists sit outside this two-sided coin. Now if bitcoin completely fails, the hobbyists will no doubt flee. But I think it's worth noting that hobbyists can be an important driver in something new like they were with personal computers, and it feels like bitcoin certainly has that.
—By Jon Steinberg
Jon Steinberg is the president & chief operating officer of BuzzFeed and is responsible for all business management, company operations, finance, and social advertising operations. Follow him on Twitter @jonsteinberg.