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 block chain 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.
Mining is intentionally designed to be resource-intensive and difficult so that the number of blocks found each day by miners remains steady. Individual blocks must contain a proof of work to be considered valid. This proof of work is verified by other Bitcoin nodes each time they receive a block. Bitcoin uses the hashcash proof-of-work function.
Mining is also the mechanism used to introduce Bitcoins into the system: Miners are paid any transaction fees as well as a "subsidy" of newly created coins. This both serves the purpose of disseminating new coins in a decentralized manner as well as motivating people to provide security for the system.
Bitcoin mining is so called because it resembles the mining of other commodities: it requires exertion and it slowly makes new units available to anybody who wishes to take part. An important difference is that the supplydoes not depend on the amount of mining. In general changing total miner hashpower does not change how many bitcoins are created over the long term.
Difficulty
The Computationally-Difficult Problem
Mining a block is difficult because the SHA-256 hash of a block's header must be lower than or equal to the target in order for the block to be accepted by the network. This problem can be simplified for explanation purposes: The hash of a block must start with a certain number of zeros. The probability of calculating a hash that starts with many zeros is very low, therefore many attempts must be made. In order to generate a new hash each round, a nonce is incremented. See Proof of work for more information.
The Difficulty Metric
The difficulty is the measure of how difficult it is to find a new block compared to the easiest it can ever be. The rate is recalculated every 2,016 blocks to a value such that the previous 2,016 blocks would have been generated in exactly one fortnight (two weeks) had everyone been mining at this difficulty. This is expected yield, on average, one block every ten minutes.
As more miners join, the rate of block creation increases. As the rate of block generation increases, the difficulty rises to compensate, which has a balancing of effect due to reducing the rate of block-creation. Any blocks released by malicious miners that do not meet the required difficulty target will simply be rejected by the other participants in the network.
Reward
When a block is discovered, the discoverer may award themselves a certain number of bitcoins, which is agreed-upon by everyone in the network. Currently this bounty is 12.5 bitcoins; this value will halve every 210,000 blocks. See Controlled Currency Supply.
Additionally, the miner is awarded the fees paid by users sending transactions. The fee is an incentive for the miner to include the transaction in their block. In the future, as the number of new bitcoins miners are allowed to create in each block dwindles, the fees will make up a much more important percentage of mining income.
The mining ecosystem
Hardware
FPGA Module
Users have used various types of hardware over time to mine blocks. Hardware specifications and performance statistics are detailed on the Mining Hardware Comparison page.
CPU Mining
Early Bitcoin client versions allowed users to use their CPUs to mine. The advent of GPU mining made CPU mining financially unwise as the hashrate of the network grew to such a degree that the amount of bitcoins produced by CPU mining became lower than the cost of power to operate a CPU. The option was therefore removed from the core Bitcoin client's user interface.
GPU Mining
GPU Mining is drastically faster and more efficient than CPU mining. See the main article: Why a GPU mines faster than a CPU. A variety of popular mining rigs have been documented.
FPGA Mining
FPGA mining is a very efficient and fast way to mine, comparable to GPU mining and drastically outperforming CPU mining. FPGAs typically consume very small amounts of power with relatively high hash ratings, making them more viable and efficient than GPU mining. See Mining Hardware Comparison for FPGA hardware specifications and statistics.
ASIC Mining
An application-specific integrated circuit, or ASIC, is a microchip designed and manufactured for a very specific purpose. ASICs designed for Bitcoin mining were first released in 2013. For the amount of power they consume, they are vastly faster than all previous technologies and already have made GPU mining financially.
Mining services (Cloud mining)
Mining contractors provide mining services with performance specified by contract, often referred to as a "Mining Contract." They may, for example, rent out a specific level of mining capacity for a set price at a specific duration.
Pools
As more and more miners competed for the limited supply of blocks, individuals found that they were working for months without finding a block and receiving any reward for their mining efforts. This made mining something of a gamble. To address the variance in their income miners started organizing themselves into pools so that they could share rewards more evenly. See Pooled mining and Comparison of mining pools.
History
Bitcoin's public ledger (the "block chain") was started on January 3rd, 2009 at 18:15 UTC presumably by Satoshi Nakamoto. The first block is known as the genesis block. The first transaction recorded in the first block was a single transaction paying the reward of 50 new bitcoins to its creator.
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Use ad blockers? Mine some Monero to get access to news, says US site
Cryptocurrency trend moves into publishing as Salon comes up with plan to make customers pay
US website Salon.com has decided that if people want to block its ads, they should pay in another way - by allowing the biz to use their computing power to mine for cryptocurrency.
On visiting Salon’s site, users with an ad blocker are greeted with a message that asks them to either disable the kit or allow the site “to use your unused computing power”.
Media outlets are struggling to make ends meet, and finding new ways of funding is crucial for their continued survival. So while others are looking to paywalls or premium options, the popular news and opinion site has decided to try and make money in the most hipster way possible.
In its FAQs, Salon says that the recent increase in ad-blocking technology has “cut deeply into our revenue” - so what else can it do but use readers’ “spare” computing power to go mining?
“For our beta program, we’ll start by applying your processing power to mine cryptocurrencies to recoup lost ad revenue when you use an ad blocker,” the site said, adding that Monero is being used for the beta.
It goes on to tell readers that their unused processing power is not being used “to it’s [sic] full potential” while they’re browsing the site.
The site also shamelessly tries to align its mining masterplan with other systems that use computing power for greater good, saying “in the future” it may be used for “humanitarian and scientific projects”.
For those who might not know how the process works, Salon has a handy explainer that makes it all sound rather innocent: “Think of it like borrowing your calculator for a few minutes to figure out the answer to math problems, then giving it back when you leave the site.”
In the main blurb, Salon does note that “mining uses more of your resources which means your computer works a bit harder and uses more electricity than if you were just passively browsing the site with ads”, with a further question later on explaining why people's fans might be turning on.
But ultimately, the only choice people have is to not read, set the ads free or let them mine Monero. ®
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Showtime websites secretly mined user CPU for cryptocurrency.
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This past weekend, Showtime websites were found to be running a script that allows the sites to mine visitors’ extra CPU power for cryptocurrency, as pointed out by users on Twitter. The afflicted sites included showtime.com and showtimeanytime.com, but the script has since been removed following reports from Gizmodo and other sites.
The crypto mining Javascript is called Coinhive, and according to the site, it was made as an alternative to banner ads as a way for website owners to get around pesky ad-blockers. Ironically, some ad-blockers have now included Coinhive on the list of the banned.
The script mines the cryptocurrency known as Monero. Launched in April 2014, Monero is meant to be a more anonymous version of Bitcoin because you can’t view transactions on a public ledger. Thirty percent of the proceeds go to Coinhive, while sites using the service, like Showtime and The Pirate Bay, keep the rest. For its part, The Pirate Bay has apologized for secretly running the script and then asked its users if they preferred ads or CPU mining. Surprisingly, many of the comments indicate a positive reception towards the idea.
Coinhive updated its site to include the statement: “We're a bit saddened to see that some of our customers integrate Coinhive into their pages without disclosing to their users what's going on, let alone asking for their permission.” Going forward, the service claims that it will now ask people browsing a site for permission before mining their CPU. Showtime declined to comment.
Cryptocurrency Mining: What It Is, How It Works And Who's Making Money Off It
NVIDIA Corporation NVDA 2.7%'s second-quarter earnings released earlier this month, though exceeding expectations, elicited cautionary reaction from the investor as well as analyst communities. Traders bid down the stock by over 5 percent on Aug. 11.
One of the reasons cited for the negative reaction was cryptocurrency contributing to much of the outperformance.
Analysts Blayne Curtis and Christopher Hemmelgarn of Barclays believes revenue stream from cryptocurrency is fickle. Therefore, the analysts were not in favor of assigning a multiple to it, as it has the potential to become an eventual headwind.
Rival Advanced Micro Devices, Inc. AMD 3.11% also had a similar tale to tell. The company indicated that cryptocurrency demand remains strong, while also suggesting that the demand might not last forever.
What Is Cryptocurrency?
Cryptocurrency, as the name suggests, is a form of digital money designed to be secure and anonymous in most cases. It uses a technique called cryptography — a process used to convert legible information into an almost uncrackable code, to help track purchases and transfers.
Giving a simple definition, Blockgeeks says it is just limited entries in a database no one can change without fulfilling specific conditions.
Cryptography is a technique that uses elements of mathematical theory and computer science and was evolved during the World War II to securely transfer data and information. Currently, it is used to secure communications, information and money online.
Cryptocurrencies allow users to make secure payments, without having to go through banks.
Some cryptocurrencies include bitcoin, Bitcoin Cash, Ethereum, DigitalNote, LiteCoin and PotCoin.
Bitcoin has the distinction of being the first cryptocurrency, having been introduced in 2009. Since then, this class of cryptocurrencies mushroomed, with more than 900 currently active.
How Cryptocurrencies Work
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 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.
Assume X wants to buy an item valued at $10,000 and he realizes that the seller Y accepts cryptocurrency, say bitcoin, as a form of payment. X scouts around to find the prevailing exchange rate, say $1,000 per currency. X gets Y's public Bitcoin address from Y's website, although both parties remain anonymous to each other.
X can now instruct his Bitcoin client or the software installed on his computer to transfer 10 bitcoins from his wallet to Y's address. X's Bitcoin client will electronically sign the transaction request with his private key known only to him. X's public key, which is a public information, can be used for verifying the information.
When X's transaction is broadcast to the Bitcoin network, it would be verified in a few minutes by miners. The 10 bitcoins will now be transferred to Y's address.
Mining
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, which helps miners compete with their peers in solving complicated mathematical problems. This would need huge computer resources. In regular intervals, miners would attempt to solve a block having the transaction data using cryptographic hash functions.
Hash value 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 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.
Bank of New York Mellon Corp BK 4.74% has been running an internal blockchain platform for U.S. Treasury bond settlements since early 2016, a Marketwatch report quoting Morgan Stanley said. The private nature of the platform has kept it out of the regulatory purview. Once the bank decides to roll it out to clients and use it commercially, regulatory oversight might come into the picture.
A complete mining kit consists of graphics cards, a processor, power supply, memory, cabling and a fan, which would cost between $2,400 and $3,800 on Amazon.com, Inc. AMZN 2.34%, according to Bloomberg.
The top three mining hardware, according to 99bitcoins.com, are Avalon6, AntMiner S7 and AntMiner S9.
Given that existing GPUs aren't powerful enough, now miners are flocking to application-specific integrated circuits, or ASICs. To circumvent this shortcoming, Nvidia and AMD are said to be working on GPUs, which could be used specifically for the purpose.
The two companies who are dominant in consumer-grade mining hardware are Canaan and Bitmain. Bitmain, based in Beijing, does mining as well as manufactures mining hardware.
Mining Pools And Their Share Of Mining
Source: Block Chain
Mining pools are concentrated in China, which boasts of 81 percent of the network hash rate.
Why Mining Chips Are A Fickle Revenue Stream
For companies such as AMD and Nvidia, which have dominant positions in the gaming chip market, a focus away from their core business may not be a prudent course of action.
As seen, these companies may have to bring out new GPUs designed exclusively for this purpose to pose a real threat to the ASIC chips, which are predominantly manufactured by the Chinese, who are notorious for their low-cost market positioning. How viable is the spend on such exclusive chips is a moot point.
Additionally, national governments and exchanges are mulling over regulation of the whole realm of cryptocurrencies. Japan has recently introduced legislation to protect users after Tokyo-based Bitcoin exchange Mt Gox collapsed in 2014. Similarly, introducing taxation such as capital gains tax on Bitcoin sales may also impede the cryptocurrency industry.
Media outlets are struggling to make ends meet, and finding new ways of funding is crucial for their continued survival. So while others are looking to paywalls or premium options, the popular news and opinion site has decided to try and make money in the most hipster way possible./cdn.vox-cdn.com/uploads/chorus_image/image/56860525/showtime.0.png)
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Source: Block Chain
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