While digital currency has been a concept for a few decades, it wasn't until 2009 that Bitcoin was invented, and other cryptocurrencies soon followed.
In a nutshell, Bitcoin was created as a way to exchange value with other people without needing a bank or other intermediary to verify a transaction and avoid fraud.
To do so, a network of machines constantly works to verify the chain of transactions leading up to the transfer of all or part of a coin to someone else. Each time a coin — expressed as a code of numbers and letters — is exchanged, it is encrypted and recorded publicly. After the network verifies that the digital receipt of sorts is the same as the copy they have, they add your new transaction to what's called a block.
Then the machines work to "mine" by guessing the password for that encrypted block. If they guess it, they essentially create new code to add on and make a new block, which is linked with others in a digital ledger known as "blockchain." The reward for that work comes in the form of Bitcoin.
As more transactions are made, it gets harder to hack the system, as someone would have to control more than half of the global network to deceive others into believing that a falsified block matches the other copies of the ledger. There's also less reward for the same electricity, as there are only 21 million Bitcoin possible, and the amount rewarded for finding new blocks is cut in half on a regular schedule. Early miners got 50 Bitcoins for their work. Now they get 12.5, and soon they'll get only 6.25.
But with the price of Bitcoin ballooning from almost nothing in its infancy to thousands of dollars per coin currently, and with other coins like Ethereum and Litecoin gaining in popularity, the prospect is attracting big players.
By the end of this year, Salcido plans to have about 50 megawatts in mining power. In three or four years, he plans to have more than 160 megawatts, and, eventually, he hopes to run 10 percent of the global Bitcoin network.
Salcido likes to tell people not to focus so much on the fact that Bitcoin has value when they're trying to understand his motivations. At the end of the day, his machines are working to build and support a network by writing code.
While his machines work for new Bitcoin, they are also processing transactions on a regular basis and taking a small fee in the form of code. Unlike credit card transactions, which can take 1 percent to 5 percent in fees, the miners take a tiny fraction of 1 percent, making it cheaper for people to pay each other while earning him income.
But the underlying technology, blockchain, is really where he sees massive potential. He compares it to software: There isn't one "software," there are many kinds, with infinite applications.
Blockchain can be used to bundle services that were never bundled before, Salcido says, like a contract, the payment for that contract, and the verification and security for that contract. And other applications are being developed all the time.
Major companies are investing in new ways to use the tech: Maersk, the largest shipping container operator in the world, and IBM announced earlier this year that they'll partner to see how blockchain can be used as a more efficient way to track global shipments; Amazon is exploring ways to use blockchain for financial services; and Starbucks is exploring use of blockchain as part of a payment app.
And with all those applications, someone needs to run the network. That's where Salcido is positioning himself. His strategic goal is to become the major hub for the network on the West Coast.
"This is not just pillaging our power infrastructure for a quick buck," Salcido says. "You're creating a network that will be used as a faster, cheaper, more secure option, that actually is something useful for society. It's not just digging a hole and throwing electrons in the ground."
Even cities are looking into possible applications. Boise is working with a company called ULedger to explore internal business applications for blockchain.
"I definitely want to clarify we're not doing anything related to cryptocurrencies, but we are utilizing blockchain technologies," says Darrin Harris, Boise's chief information officer. "Blockchain is about creating an immutable record, a transaction that has occurred that is immutable. Meaning neither party involved, or any other third party, can really question the validity of that record, because no one can change it or touch it to manipulate it."
Still, for now, the technology isn't mature, Salcido concedes.
"But I don't look at my 6-year-old son and say, 'Boy, he's a crappy pitcher. He can only throw a 30-mile-an-hour fastball,'" Salcido says. "I say, 'When he's a man, he's going to be a great pitcher.'"
Though it's still very new, Salcido argues Bitcoin's blockchain will ultimately serve as a sort of base code, and once applications are developed, "the adoption rate is going to be rapid.
"Then it starts to make sense to people why would we build 40-, 50-year assets, at large expense?" Salcido says. "We know what we're building and we also know that there are a lot of people just out to make a quick buck. But I kind of argue: Don't throw the baby out with the bath water."
But while Salcido fully plans to remain invested in his town, Wenatchee, it's not as clear if the new operators from around the world have similar plans.
Billy J. Roberts/Department of Energy Illustration
Annual average electricity rates by utility service territory. The map combines data provided by ABB Energy Velocity Suite and state averages reported by EIA.