Montana residents are getting a crash course in the world of cryptocurrency.
After CryptoWatt LLC announced in December that it planned to build a bitcoin mining facility in Anaconda and later said it wanted to build a similar facility in the former MSE complex south of Butte, residents in both cities have reacted with a mix of responses, ranging from skepticism and enthusiasm to amusement.
Residents like Anacondan Ken Schmidt, who created a set of copper coins stamped with the bitcoin logo.
“Everyone in Anaconda should have at least a dozen to hand out to friends, trade for a beer, slice of pizza, or use as tokens in a Monopoly game,” Schmidt wrote on Facebook. “Great for flipping coins when betting on the stock market.”
Meanwhile, Montanans are now able to buy a beer using the cryptocurrency at Lewis and Clark Brewing Company in Helena. The brewery has a new beer named after the cryptocurrency, Bitcoin Bitter, according to NBC affiliate station KURL.
As for folks in southwest Montana, it’s been three months since the subject of bitcoin has been thrust upon the people of Butte and Anaconda. And for many, a host of questions remains about cryptocurrency mining.
For example, how can bitcoin be worth anything if you can’t hold it in your hand? Can I buy anything with bitcoin? And is bitcoin mining actual mining, or is it just a figure of speech?
These questions and more were asked during a public information session Thursday night, led by CryptoWatt co-chief technology officer Fred von Graf in the Copper Lounge on Montana Tech’s campus.
For one, von Graf said, bitcoin is just one among many types of cryptocurrencies.
And no, cryptocurrency isn’t something you can hold in your hand. It has no physical form and exists electronically — digitally on the internet on computers, smartphones, and other devices.
Joan Porter, 83, was one of about 50 Butte residents who braved winter weather temperatures to attend the information session.
Porter said she came to the lecture because she wanted to understand more about cryptocurrency.
“I was more interested in the mining operation that they’re going to be putting here in Butte, how it operates and how that’s tied into cryptocurrency,” Porter told The Montana Standard.
Porter asked von Graf about the nature of bitcoin mining — how it works and what type of equipment will be used.
CryptoWatt plans to mine using two types of “miners” made by two different manufacturers, von Graf said. The company will also host mining equipment for clients who want to mine at the CryptoWatt facility.
As for the “miners” that CryptoWatt will use, they aren’t literal miners. Rather, they are pieces of computer equipment that are designed specifically for cryptocurrency mining.
Computers that mine for bitcoin do so by performing work on the bitcoin public ledger and in return they are awarded the digital currency.
The work involves performing complex calculations, which allows the computers to validate bitcoin transactions made by millions of users all over the world. Those transactions are recorded on an online public ledger called a blockchain.
Bitcoin mining wouldn’t be possible without large computers, because validating the millions of bitcoin transactions that take place every day requires a vast amount of computing power — more than any one entity could ever muster.
Thus, it’s often said that bitcoin is a “decentralized” currency because no single entity — a bank, federal reserve or otherwise — keeps track of the ledger or is backing the currency. Instead, it’s a plurality of users that provides validation and engenders trust and belief in the system.
“It’s basically a peer-to-peer transaction that’s occurring between individuals, groups, or whatever it may be,” said von Graf. “It allows you to have a decentralized control system.”
But the aspect of decentralization is something that caused some attendees to express skepticism about bitcoin Thursday night.
If it’s not backed by a central authority, what determines its value?
Von Graf explained that the value of bitcoin changes over time, but its worth is also determined by how much value users decide to assign to it. It’s a bit like deciding to trade a coat for a pair of boots in the days of yore when people traded on the basis of goods and services.
“If I take an ounce of gold, I can still get a wool suit no matter if I was in the 1700s, the 1400s, or today. It’s about one wool suit,” von Graf said.
Robert Edwards, meanwhile, was one of three people in the room who said he owned bitcoin at one time or another.
A self-described libertarian, Edwards said his political beliefs are what got him interested in the decentralized cryptocurrency.
Edwards didn’t use a computer to mine for bitcoin.
Instead, he traded some goods with a friend for bitcoin in 2012 (when it was worth about $13) and sold off his bitcoin a few years later when the cryptocurrency was trading at $800. He managed to make a profit, Edwards said, but had he held onto his bitcoin for longer, he could have walked away with a lot more. As of Friday afternoon, the price of a single bitcoin was $11,039, according to Google.
As a libertarian, Edwards says the cryptocurrency is less interesting to him today because of the difficulty of making transactions and because the currency isn’t as anonymous as people initially believed it would be.
“Every transaction is very visible (on the public ledger),” Edwards said. “And that’s not a libertarian thing.”
Later, The Montana Standard asked von Graf if what attendees were really grappling with was a larger question about how value gets assigned to currency — or the aforementioned wool suit.
“I think there is that (question),” von Graf said. “You and I both believe that the dollar's worth this much, but what is actually backing it? I mean sure, there’s the Fed and the U.S. government saying it’s worth it, but like any currency, what’s actually backing our understanding behind it?”