Say what you want about the long-term viability of Bitcoin, the digital currency that's been going crazy lately.
Bitcoin has been incredibly lucrative for Sam Cole, Marcus Erlandssona and Andreas Kennemer.
Because of Bitcoin, they made $3 million in just four days.
Their company, KnCMiner, doesn't own Bitcoins or trade them. They make the special computers that allow people to "mine" Bitcoins from cyberspace.
From November 7 to 10, 2013, while Bitcoin prices were climbing wildly, Stockholm-based KnCMiner sold out of its newest Bitcoin computer, selling 5,000 units. These computers cost $7.000 a piece (and yes, they take Bitcoin as payment).
At one point, the computers were selling so fast that KnCMiner generated $600,000 in less than five minutes, it said.
That's because there's basically three ways to get a hold of a Bitcoin. You can buy them. You can take them as payment for products or services. You can go out into cyberspace and create them, otherwise called "mining."
Mining a Bitcoin is hard for a typical computer to do. A computer has to solve a series of difficult cryptography problems and most computers don't have the computational power to do that.
So companies like KnCMiner developed special Bitcoin computers using custom computer chips. (Such chips are called ASICs which stands for "Application-Specific Integrated Circuit.") These computers do only one job: mine Bitcoins.
We asked cofounder Andreas Kennemer about the business of Bitcoin computers.
Business Insider: How is a Bitcoin "mined"?
Andreas Kennemer: Bitcoins are built from calculating an algorithm (or encryption problems) called SHA-256. By using the processing power from your ASICs or graphic cards, you try to solve the algorithm (called "solving a block") to create new Bitcoins. If you succeed in solving the algorithm, your result is verified by the other processing “computers” in the Bitcoin network.
If you are the lucky first to solve a block you get rewarded with Bitcoins, currently 25 per block. The algorithm also keeps track of how many Bitcoins are allowed to be created. If the creation exceeds more than 3600 Bitcoins a day, the difficulty to create Bitcoins increases. This means that it gets harder for the computers to solve a block and the amount of Bitcoins that can be created remains the same.
BI: What's different about a Bitcoin computer from a regular PC, like a high-end MacBook pro? Or a "supercomputer"?
AK: A Bitcoin computer has an ASIC chip specifically designed for calculation of the Bitcoin algorithm (SHA-256). This computer has only one task and can only perform that task. Because it is specifically designed for that purpose, it can calculate the Bitcoin algorithm extremely fast compared to a [regular computer] CPU or a graphic card.
Page 2 of 2 - We have spoken to Chinese engineers running the world’s strongest supercomputer in China. If that supercomputer were to calculate the Bitcoin algorithm, it would be the equivalent of 40 of our Jupiter models [550 gigahashes per second, gh/s, or 550 billion computations per second] to be equal in performance.
BI: How fast can one of your top computer mine bitcoins?
AK: Current average mining speed of our fastest model (Jupiter) is 0.6 coins a day per device.
BI: Are serious Bitcoin minors also using supercomputers to mine?
AK: No, those computers can’t compete with our devices. The ASICs are specifically designed for calculation of the SHA-256 algorithm and the cost-per-Gigahash (calculation power) is much lower.