At a time when Bitcoin technology has become widely embraced by commercial investors and mainstream financial markets participants as an area of rapid and high level development which could be the making of virtual currency, investor confidence has increased exponentially.
Despite the all-new, highly secure infrastructure which is being rapidly implemented across many nations with developed financial markets economies that range from Bitcoin exchanges backed by Swiss and North American regulatory authoriites, national networks of Bitcoin ATMs and sophisticated security systems which have not only increased the reach and validity of virtual currency but also stabilized its prices as MtGox’s demise begins to dwindle into relative insignificance, all-consuming disasters can still occur.
Last week, a blaze destroyed a Bitcoin mining facility in Thailand, a nation whose government has publicly displayed its disdain for the ‘manufacturing’ and use of virtual currency.
The five megawatt mining facility was completely distroyed, which, according to a report by Quartz, affected the entire Bitcoin network.
In this circumstance, whereby Bitcoin’s advantage of being of a decentralized nature in which it is neither generated, owned or overseen by a national central bank, neither is it a sovereign currency of any nation meaning that Bitcoin tranactions are identical globally, with no exchange costs, can also prove to be its achilles heel.
With sovereign currency, should a nation experience an event which devalues its currency, such as a war, economic demise, divestment of industry or bank insolvency, disruptions and overt currency volatility is restricted to that particular nation, however in this case, should a prominent piece of Bitcoin infrastructure experience an unintended event in one particular region, the entire ecosystem is affected.
In this particular case, the hashrate, which is the terminology given to the amount of computing power which is in use across the entire Bitcoin mining network, was affected significantly. At the end of October, the hashrate rose to approximately 340,000,000 gigahertz per second (gh/s), falling to approximately 290,000,000 gh/s after the fire.
It is yet unknown as to the cause of the blaze, and indeed with the Thai government’s aversion to virtual currency yet inability to stem it, possibility of intentional cause has not been ruled out, however the process of operation in large scale mining facilities generates a vast amount of heat.
Just half an hour was all it took for the entire facility to be razed to the ground, with speculation that the initial fire had spread to flammable acoustic foam, spreading it rapidly. Whereas in the United States, a top quality professional data center facility would have several systems in place such as sprinklers and heavy duty heat sinks, it is clear that this particular Thai facility, operated by a company named Cowboyminers, lacked such equipment.
In this matter, Bitcoin’s current technological standpoint resembles the early days of retail electronic currency trading insofar as the world is used to separate, physical, sovereign tender, yet very quickly, a method of using a virtual tender which is generated by technology that traverses borders has materialized – however, despite Bitcoin’s egalitarian intentions, it is clear that not all technology is created equal.
Photographs courtesy of Coindesk