There is a shadow economy that is growing online: bitcoins, an anonymous peer-to-peer currency that was created by Satoshi Nakamoto (a presumed pseudonym; his/her actual identity is not known). Commercial digital currencies have been tried in the past (Facebook Credits being the largest recent example) but the thing that makes bitcoins different is that–like p2p networks such as Bitorrent, it is decentralized–meaning that it is largely out of the control of regulators, corporations and litigation. Already, there are exchanges available for trading between bitcoins and real currency (as well as a way to exchange Bitcoin for Linden Dollars), which gives them actual value. Nobody knows whether the value will hold up, or whether bitcoins amount to a large ponzi scheme–I suspect that the value could collapse as easily as it has run up recently. But the idea of bitcoins is certainly fascinating, despite the ability to use them to trade in illicit goods as readily as they may be used to circumvent government oppression in certain parts of the world.
The pool of available bitcoins is growing over time, thanks to an inflation algorithm that is built-in to the protocol. New bitcoins can be created by “mining,” which is essentially running an algorithm akin to Folding@Home–except you’re solving for an algorithm that rewards bitcoins. Before you get too excited: it takes enormous computing power to extract a significant amount of bitcoin currency. Some people have actually set up mining operations on specially-optimized computing hardware, but it’s questionable whether the amount of bitcoin they’re extracting is greater than the cost of power consumption (although it raises an interesting possibility for people who have access to a renewable power source, like a private wind turbine!)
You can run a bitcoin client on your computer, and it’ll happily churn through the algorithm day in and day out, but will probably take hundreds of days for you to strike a bitcoin payout. Of course, it could be faster: it’s ultimately a function of luck, and you could get a payout on the first day.
It’s sort of a legalized lottery, where you “buy in” with energy and CPU power, and get paid back in the form of bitcoins.
It’s a fascinating and somewhat bizarre form of currency creation that parallels things like the gold farming that has emerged in MMORPG games. And of course, the “luck” aspect of creating bitcoins is also a type of game. You install the bitcoin software yourself (which includes the ability to mine using your computer’s spare cycles), or you could use Web-based software that allows you to mine as part of a pool (and split the payout with other people). You too could soon be earning pennies per week from home! (As an experiment, I’ve attached a script to my website to generate some Bitcoins using the spare cycles you have available while visiting this website, using the code available from bitcoinplus.com).
