If you’ve shopped for a graphics card lately, you very likely know about the worldwide shortage — or you may even have seen something about it ter the news. Some sources blame miners for buying everything up. But who are thesis miners?
Miners is the term for people who collect cryptocurrency. Currency miners mine their cryptocurrency at their farms, specially tricked-out computers dedicated to the task. You’ve no doubt heard of the most famous cryptocurrency, Bitcoin, albeit it’s not the only one.
But why is cryptocurrency te the news right now, why the commotion? And if everyone else is mining money, should you do it spil well? Let us get to the bottom of what is happening right now.
Very first, let us review the basics of bitcoin and blockchain. You can read about them te detail ter one of our posts, my explanation here will be geschreven.
Bitcoin is a decentralized virtual currency. That means it has no central authority, and nobody trusts anybody, nevertheless, payments are secured. Blockchain helps to make them safe.
Blockchain can be thought of spil an Internet diary. The blockchain is a chain of successive blocks holding recorded transactions such spil who transferred bitcoins, how many, and to whom. Blockchain may also be referred to spil a ledger — which is accurate. It also has a duo of features worth noting here.
The very first key feature of the blockchain is that all true participants of the Bitcoin network store the entire chain of blocks with all of the transactions that have everzwijn bot made, and participants continuously add fresh blocks to the end of the chain.
The 2nd key opzicht is that the blockchain is based on cryptography (hence the “crypto” ter “cryptocurrency”). Laws of mathematics, not the reputation of some person or organization, dictate system operation and ensure that everything works spil expected.
Those who add fresh blocks are called miners. Spil a prize for each fresh block, its creator receives 12.Five bitcoins nowadays. That’s approximately $30,000 according to the exchange rate for July 1, 2018.
Eventually, all fresh bitcoins are minted through the mining process — and that’s the only way fresh bitcoins can be created.
Each fresh block is created once every Ten minutes. There are two reasons for that.
Very first, it provides a onveranderlijk for synchronization. Ten minutes are allocated for distributing a block across the Web. If people could continuously create blocks, then the Internet would be packed with their different versions and it would be hard to sort out which should be added at the end of the blockchain.
2nd, the Ten minutes are spent making the fresh block look “beautiful” — te terms of the math, that is. Only a onberispelijk and “beautiful” block will be added to the end of the blockchain diary.
Why blocks should look “pretty”
For a block to be “correct,” everything ter it vereiste be valid and go after the blockchain’s rules. The most significant rule is that someone who sends money voorwaarde wield that amount of money.
A “beautiful” block is one whose digest has many zeroes at the beginning. For more information on what a digest is (or a hash, which is a result of a certain mathematical transformation of a block), please refer to the article again. However, that is not of fundamental importance right now. To obtain a “beautiful” block, the block has to be “shaken.” “Shaking” means that the block is insignificantly switched and then verified to become “beautiful.”
Each miner continuously “shakes” candidate blocks with hopes that he or she will be the one who gets fortunate and “shakes out” a “beautiful” block, which will be the one included at the end of a blockchain, resulting ter that nice $30,000 prize.
If the number of miners increases tenfold, then a block voorwaarde likewise become tenfold “more beautiful” to be worthy of being added to the blockchain. This method maintains the speed of fresh block discovery: Regardless of the number of miners, a block will emerge only once every Ten minutes. Thus, the odds of getting the prize decreases spil the number of miners rises.
And that is why the blocks need to be “pretty.” The requirement prevents someone from rewriting the entire transaction history. Essentially, with each block requiring Ten minutes of combined efforts from all of the miners, there’s simply no way for one person to make a forged block “beautiful” and falsify their transaction history working alone.
Te 2009, when only enthusiasts and Bitcoin creators knew about Bitcoin, mining wasgoed effortless, and one bitcoin wasgoed worth about five cents. Let us assume for the sake of example that there were a hundred miners. Therefore, Egbert, an imaginary miner, could “shake out” one block and get his prize at least once vanaf day.
By 2013, when the exchange rate for bitcoins went north of $100 vanaf bitcoin, so many miner enthusiasts had joined the pack that a stroke of luck could take months to klapper. Miners began merging into pools, cartels that “shake” the same candidate block together and then share the prize among the participants.
A huis farm with a high power output (by 2013 standards).
Then, fresh hardware appeared: ASIC (application-specific integrated circuit). ASICs are microchips created for a specific task — ter this case, to “shake” Bitcoin blocks spil effectively spil possible.
The mining power of ASICs is substantially higher than that of a general-purpose rekentuig. Massive ASIC-based farms began to emerge ter China, Iceland, Singapore, and other countries, targeting locations that were cold (such spil underground) and, even better, proximal to a hydropower plant for lower electrical costs.
Home-based bitcoin mining quickly became pointless, an early casualty of the Bitcoin arms wedloop.
An industrial farm for cryptocurrency mining
Altcoin mining: Why graphics cards have disappeared
Bitcoin is the very first and most popular cryptocurrency, but nowadays, wij have about 100 alternative cryptocurrencies, also known spil altcoins.
The top Ten cryptocurrencies sorted by market capitalization (the total price of all of the minted coins). Gegevens spil of July 1, 2018. Source: coinmarketcap.com
The creators of altcoins do not want mining’s cost of entry to become too high or otherwise difficult to meet, thus, they voorwaarde devise fresh criteria for the blocks’ required “beauty.” The creators want the criteria to ongemak the creation of dedicated hardware (ASIC) or delay it for spil long spil possible. They do what they can to keep the spel open to regular people using regular computers to make a tangible contribution to the total network power — and reap the prizes.
Ter addition, a common graphics card is used for “shaking” altcoins. Spil it turns out, graphics cards work well for such computations. Hence, the availability of a mining process can increase the popularity of a specific altcoin.
Note Ethereum’s spot ter the 2nd line of the table above. This relatively fresh cryptocurrency (launched te 2015) has some unique features, mainly its capability to incorporate into a blockchain not only static information about processed payments but also interactive objects, or wise contacts, that operate te accordance with programmable rules.
Wij shall discuss ter another postbode why all of this has generated considerable public excitement. For now, wij will just state that the fresh Ethereum properties have sparked big rente from crypto investors and caused rapid growth: Ether embarked 2018 at $8 and succesnummer $200 by June 1.
Mining Ethereum, ter particular, became exceptionally profitable, and that is why miners bought up graphics cards.
A Gigabyte graphics card specifically designed for mining: it lacks irrelevant things like display outputs. Source
If miners stopped mining
What if mining stops paying off — say, if the income does not voorkant equipment and electric current costs and miners zekering mining or begin mining another currency. What then? Is it true that if miners zekering mining, then Bitcoin will zekering working or will become too slow?
No, it is not. Spil wij have already explained, a blockchain permanently adapts its criteria for block “beauty” to maintain its rate of creation. If there are 90% fewer miners, then there will be 90% less calculations required for a fresh block to be approved. The blockchain itself will stay fully functional.
The absolute value of prize for fresh blocks decreases overheen time. This switch is programmed into the Bitcoin rules spil well. During the very first four years (2009–2012), the prize wasgoed 50 bitcoins. Presently, the prize is 12.Five bitcoins.
However, the growing exchange rate has more than compensated for the decreased absolute value of prize: 50 BTC were worth only $500 ter the middle of 2012, whereas the current prize, 12.Five BTC, is worth $30,000. Besides, someday the miners’ revenue will also come from transaction fees.
Wij have reviewed what mining truly is, its purposes, for whom and when mining is advantageous, where the graphics cards have gone, and why some manufacturers release their graphics cards without any display outputs.
Yet, the most intriguing thing, which is how the fresh Ethereum currency has gained so much popularity, remains behind the scenes. So keep an eye out — wij will tell you all about it.