Bitcoin Miners: Burning Coal to Make Pretend Money

The Block Erupter USB is a little device that mines Bitcoins. Bitcoins are the electronic cryptocurrency which was once used to buy drugs online through the Silk Road, but since the site was revealed to be an FBI/DEA honeypot, it is now solely used for currency speculation. Mining bitcoins is done through a computational method that uses large amounts of electricity and generates large amounts of heat. In fact, if you check out the customer pictures of Block Erupters, owners have set them up in rows with fans blowing on them to keep them from overheating.

The problem with mining bitcoins in late 2013, apart from the fact that you can’t easily exchange them for US dollars (the main exchange, Mt. Gox, had their US-based branch shut down for violations of money laundering laws) is that the computational difficulty of doing so has gone up astronomically. It’s gone up so much, in fact, that the Bitcoins you would be able to mine are far less valuable than the cost of buying the device in the first place.

Of course, the fundamental problem with Bitcoin mining hardware is the obvious: if the devices were profitable, wouldn’t the manufacturers just keep them and use them to mine Bitcoins themselves? You could ask this question to everyone from the makers of the relatively-cheap Block Erupter USB through the $500+ Block Erupter Blade all the way up to Butterfly Labs, maker of a $4,500+ bitcoin miner.