BlockchainTechnology

What is mining?

Mining and Blockchain

 

What is mining?

 

Preface

These days, There’s a lot of talk about Bitcoin mining.
As you know, The digital world is vast.
There is a lot of talk about digital currencies and how to extract them.
As well as, Blockchain technology is very complex.
So here are some key points to keep in mind.
These are my views on my studies in this science.

Miner

A miner is a person who extracts ore, coal, or other mineral from the earth through mining.

In its narrowest sense, a miner is someone who works at the rock face; cutting, blasting, or otherwise working and removing the rock.

Mining

Mining is the process of adding transaction records to Bitcoin’s public ledger of past transactions (and a “mining rig” is a colloquial metaphor for a single computer system that performs the necessary computations for “mining”.

This ledger of past transactions is called the blockchain as it is a chain of blocks.

The Blockchain serves to confirm transactions to the rest of the network as having taken place. Bitcoin nodes use the Blockchain to distinguish legitimate Bitcoin transactions from attempts to re-spend coins that have already been spent elsewhere.
He reward for mining a block is now 12.5 bitcoins.Earlier, only cryptography enthusiasts served as miners.

However, as Cryptocurrencies gained in popularity and increased in value, mining is now considered a lucrative business.

Consequently, several people and enterprises have started investing in warehouses and hardware.

As enterprises jumped into the fray, unable to compete, Bitcoin miners have begun to join open pools, combining resources to effectively compete.

So, miner:
1) Miner refers to devices that are specific to Bitcoin mining
2) Also, refers to those who have invested in Bitcoin mining

The concept of mining makes sense in digital currencies.
A Cryptocurrency (or Cryptocurrency) is a digital asset designed to work as a medium of exchange that uses strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets.
Cryptocurrency mining, or Cryptomining, is a process in which transactions for various forms of Cryptocurrency are verified and added to the Blockchain digital ledger.

In order to be competitive with other Cryptominers, though, a Cryptocurrency miner needs a computer with specialized hardware.
Cryptocurrency mining, or Cryptomining, is a process in which transactions for various forms of Cryptocurrency are verified and added to the Blockchain digital ledger.

Also known as cryptocoin mining, Altcoin mining, or Bitcoin mining (for the most popular form of Cryptocurrency, Bitcoin), Cryptocurrency mining has increased both as a topic and activity as Cryptocurrency usage itself has grown exponentially in the last few years.

Each time a Cryptocurrency transaction is made, a Cryptocurrency miner is responsible for ensuring the authenticity of information and updating the Blockchain with the transaction.

The mining process itself involves competing with other Cryptominers to solve complicated mathematical problems with cryptographic hash functions that are associated with a block containing the transaction data.
In order to get started mining, Cryptocurrency miners will need dedicated computer hardware with a specialized graphical processing unit (GPU) chip or application-specific integrated circuit (ASIC), sufficient cooling means for the hardware, an always-on internet connection, a legitimate Cryptocurrency mining software package, and membership in both an online Cryptocurrency exchange as well as an online mining pool.

Aspiring Cryptominers should also know that as Cryptocurrencies have risen in both popularity and value, competition has increased substantially as well and now includes organizations and enterprises with more extensive resources than most individuals can compete with
So, Currently, the only device capable of extracting profitable bitcoins is the ASIC (Application Specific Integrate Circuit).
Other popular Miner devices include the ANT.
Some nodes have special conditions, which are called ninety mining.

In the beginning, bitcoins were all miners, but today mining noodles are a little different from merely validated noodles.

Finally, Miners include transactions sent on the Bitcoin network in their blocks.
A transaction can only be considered secure and complete once it is included in a block.
Because only a when a transaction has been included in a block isit officially embedded into Bitcoin’s Blockchain.
More confirmations are better for larger payments.

 

How is mining Cryptocurrency?

A Cryptocurrency runs on a Blockchain, which is a shared ledger or document duplicated several times across a network of computers.

The updated document is distributed and made available to all holders of the Cryptocurrency.

Every single transaction made and the ownership of every single Cryptocurrency in circulation is recorded in the Blockchain.

The Blockchain is run by miners, who use powerful computers that tally the transactions.

Their function is to update each time a transaction is made and also ensure the authenticity of the information, thereby ascertaining that each transaction is secure and is processed properly and safely.

As payment for their services, miners are paid physically minted Cryptocurrency as fees by vendors or merchants of each transaction.

The value of the Cryptocurrency fluctuates based on demand and supply, although there is no fixed value for it. Buyers and sellers agree on a value, which is fair and is based on the value of the Cryptocurrency trading elsewhere.

Since there is no intermediary like bank involved in the transaction, as it is a peer-to-peer transaction, the transaction fee that is associated with credit cards is eliminated.

The identity of the buyer and seller are not revealed. However, each and every transaction is made public to all the people in the Blockchain network.

One can acquire a Cryptocurrency through exchanges found online or trade it for traditional currencies.
Cryptocurrency mining includes two functions, namely: adding transactions to the Blockchain (securing and verifying) and also releasing new currency.

Individual blocks added by miners should contain a proof-of-work, or PoW.
Mining needs a computer and a special program.
Hashvalue is a numeric value of fixed length that uniquely identifies data.

Miners use their computer to zero in on a hash value less than the target and whoever is the first to crack it would be considered as the one who mined the block and is eligible to get a rewarded.

The top three Mining hardware:
The top three Mining hardware, according to 99bitcoins.com, are Avalon6, AntMiner S7 and AntMiner S9.
For more information 

Mining and Blockchain

The question is, how can everyone in the network agree on a universal ‘truth’ about Bitcoin ownership, without having to trust anyone in the said network?

The Blockchain is not created or managed by any central authority.

Every node has access to the public ledger of transactions that acts as an authoritative record.

Somehow, every node in the network, acting on that insecure information, come up with the same conclusions and are able to replicate the same ledger.

Let’s try to explore how this works.

Miners validate new transactions and record them on the global ledger (Blockchain).

On average, a block (the structure containing translations) is mined every 10 minutes.

Miners compete to solve a difficult mathematical problem based on a cryptographic hash algorithm.
In the world of Bitcoin, it takes approximately 10 minutes to validate a new block. Our miner Joe was competing to validate the block 502425, the previous one.

Unfortunately, someone else solved the problem before him. But, the end of one block’s competition means the beginning of a new one.

As soon as the block 502425 was mined, Joe updated his local copy of the Blockchain and starts to create a candidate block, the block 502426.

While Joe’s computer (or node) was searching for the Proof of Work for the previous block, it was also listening for new transactions.

Those new transactions are added to the memory pool or transaction pool.

This is where transactions wait until they can be included in a new block and validated.
When Joe’s node is notified that the current block has a valid Proof of Work, it starts constructing a candidate block by gathering the transactions in the transaction pool.

It removes the transactions already present in the previous block ,if there are any. The block is called a candidate block because it doesn’t have a valid Proof of Work yet.

Constructing the block header

How does Block header create?

Joe’s node has the responsability to create a proper block header for the block he is mining.

In the article, I mostly focused on the Merkle tree, a summary of transactions and mentioned that there are three different sets of data in a block header: the previous block hash, the Merkle tree root and data for the mining competition.
An after that , immediately transmits the block to all its peers.

They need to validate the new block before propagating it to its peers. This is the part where a dishonest miner can be found out.

If the data is invalid, the miner would have wasted his time and computing power. Valid data includes:

  • Block header hash is less than the target
  • Block size is within acceptable limits
  • Block timestamp is less than two hours in the future.
  • The first transaction is a Coinbase transaction (and only the first)
  • The Coinbase transaction has a valid reward.
  • All transactions within the blocks are valid (also have a checklist on their own)
  • Every node validates independently new blocks following the exact same rules. This assures that miners cannot cheat.

This is a key component of the decentralized consensus.

If the block is valid, the other miners will update their own copy of the Blockchain with the new block 502246.

Joe’s block hash is now used by all the miners to mine the block 502247.

P2P

Stands for “Peer to Peer.” In a P2P network, the “peers” are computer systems which are connected to each other via the Internet.

Files can be shared directly between systems on the network without the need of a central server.
The only requirements for a computer to join a peer-to-peer network is an Internet connection and P2P software.

Common P2P software programs include Kazaa, Limewire, BearShare, Morpheus, and Acquisition.

These programs connect to a P2P network, such as “Gnutella,” which allows the computer to access thousands of other systems on the network.
Bitcoin is a peer-to-peer currency.

Peer-to-peer means that no central authority issues new money or tracks transactions. These tasks are managed collectively by the network.

 

Is that legally?

Some countries have declared Bitcoin as illegal. That’s why mining is also prohibited and considered illegal there.

But if one is Mining Bitcoin with his/her resources in a legit way, then it is not illegal, at least in many countries.

Which countries allow Bitcoin mining?

 

What is mining?
But if one is mining Bitcoin with his/her resources in a legit way, then it is not illegal, at least in many countries.

 

Security

Miners Secure the Network
Miners secure the Bitcoin network by making it difficult to attack, alter or stop.
The more miners that mine, the more the secure the network.
The only way to reverse Bitcoin transactions is to have more than 51% of the network hash power.

Distributed hash power spread among many different miners keeps Bitcoin secure and safe.

 

Criticism about this technology

  • The blockchain is a giant, distributed computer
  • The Blockchain is everlasting. Everything that is recorded into a Blockchain will remain there forever
  • The Blockchain is effective and scalable. Conventional money will soon disappear Miners provide network security
  •  The blockchain is decentralized, therefore it is indestructible
  •  The anonymous and open character of the Blockchain is a good thing

The Bitcoin ecosystem is maturing in all aspects of its economy, in particular in deposit banking, insurance, lending and derivatives, and early forms of life insurance,
According to Bitcoin alpha hedge fund Adamant Capital, if this process persists, Bitcoin’s layered protocol suite could become a global powerhouse and Poten-tial alternative to the International Monetary and Financial System.

Also
The fund made seven conclusions in the report:

  • Bitcoin tolerance versus intolerance to become a major political faultline
  • Bitcoin’s primary drivers will be in saving, lending and underwriting
  •  Collaborative custody to become an industry standard
  •  Offshore banking may transform into bitcoin banking
  • Bitcoin to mature quickly: bonds, annuities, loans, insurance
  •  Initial exchange offerings (IEO) expected to stay and grow larger
  • Bitcoin savers could accelerate a revolution in the history of thought.

Pooled mining

In the context of Cryptocurrency mining, a mining pool is the pooling of resources by miners, who share their processing power over a network, to split the reward equally, according to the amount of work they contributed to the probability of finding a block
Pooled mining is a mining approach where multiple generating clients contribute to the generation of a block, and then split the block reward according the contributed processing power.

Pooled mining effectively reduces the granularity of the block generation reward, spreading it out more smoothly over time.
Pool members are rewarded based on their accepted shares that helped in finding a new coin block.

Pay-per share (PPS): Allows instant payout solely based on accepted shares contributed by the pool member, who are allowed to withdraw their earnings instantly from the pool’s existing balance.

How to setup own Mining Pool step by step
We need install some required packages.
Make sure redis-server work.
Install open-node-mining-portal.

  • Get source.
  • Change pool/config.json.
  •  Change geekcash.json.
  •  Create new address: Save file and push updated file.
    More Informaiton

When we speak regarding Cryptocurrency, a mining pool is where miners pool their resources together to increase their processing power while keeping the costs low.

For many, using mining pools are a much more profitable option.

 

This is a short article about Bitcoin mining. See my other articles on this site for more information.

 

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