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Bitcoin mines reach the top of the world

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There is a secure facility that was once a NATO base in Reykjanesbaer,Iceland near the Arctic Circle. Now its computer servers mine Bitcoins around the clock, reports the N.Y. Times today.

To gain entry into the facility is no less daunting than gaining entrance to it when it was a NATO base. You pass through a fortified gate of a plain yellow building. You reach a checkpoint with a guard behind a bullet proof glass and continue to more security check points that maintains a system of a man-trap. You only proceed through the next door, once the one behind you is closed.

Once you have arrived at the operations center there are more than a 100 impressive silver computers, each in a locked cabinet and each cooled by blasts of Arctic air shot up from the vents in the floor.

The 21st century brings custom built machines, not miners with a pick ax. These machines run an open-source Bitcoin program, performing complex algorithms 24 hours a day. Once the access answer is achieved a new block of 25 new Bitcoins are received from the virtual currency’s decentralized network.

The network is programmed to release 21 million coins eventually. A little more than half are already out in the world, but because the system will release Bitcoins at a progressively slower rate, the work of mining could take more than 100 years.

Bitcoins are digital currency released in 2009 by a person or persons under the pseudonym, Satoshi Nakamoto. There is neither country backing the currency nor any other physical asset.

Until just a few months ago, most Bitcoin mining was done on the home computers of digital-money fanatics. But as the value of a single Bitcoin skyrocketed over the last few months, the competition for new coins set off a race that quickly turned mining into an industrial enterprise.

‘What we have here are money-printing machines,’ said Emmanuel Abiodun, 31, founder of the company that built the Iceland installation. ‘We cannot risk that anyone will get to them.’

Mr. Abiodun is one of a number of entrepreneurs who have rushed, making bets that Bitcoin will not collapse.

When the Chinese authorities issued an order that the banks of China could not accept Bitcoin there was a momentary drop of Bitcoin below $500 after a run up over $1000. Yesterday Bitcoins were tradng at $665 to $715 on MtGox.

Miners, though, are among the virtual-currency faithful, believing that Bitcoin will turn into a new, cheaper way of sending money around the world. Retail entrepreneur, Jeremy Allaire has put together a launch of Circle, a Boston-based developer of digital currency acceptance tools for merchants.

Mr. Allaire delivered a statement to the Homeland Security and Government Affairs committee this past Nov. when Ben Bernanke, members from the FBI and the assistant director of the Treasury also gave testimony in positive favor of Bitcoin.

Bitcoin entrepreneurs like, Mr. Abiodun are appearing around the globe in places like Hong Kong and Washington State. Mr. Abiodun chose Iceland, where geothermal and hydroelectric energy are plentiful and cheap. Also the arctic air is free and piped in to cool the machines, which often overheat when they are pushed to the outer limits of their computing capacity.

‘Even if you had hardware earlier this year, that is becoming obsolete,’ said Greg Schvey, a co-founder of Genesis Block, a virtual-currency research firm. ‘You are talking about order-of-magnitude jumps.’

Today, all of the machines dedicated to mining Bitcoin have a computing power about 4,500 times the capacity of the United States government’s mightiest supercomputer, the IBM Sequoia, according to calculations done by Michael B. Taylor, a professor at the University of California, San Diego. The computing capacity of the Bitcoin network has grown by around 30,000 percent since the beginning of the year.

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