Bitcoin Mining Definition
In Bitcoin network, bitcoin mining is a method of processing and securing bitcoin transactions using a set of specialized computers. Processing bitcoin transactions for guarantee their security is often complex because it entails solving mathematical problems to arrive at the answers. Bitcoin mining helps to process digital currency transactions and maintain a good record to prevent the transactions from being attacked.
Bitcoin miners are experts at solving and solving complex problems relating to bitcoin transactions using high-powered or specialized computers. Security and reliability of the bitcoin or digital currency is guaranteed through bitcoin mining. The miners cary pt a painstaking verification on transactions to ascertain their trustworthiness.
A Little More on What is Cryptocurrency Mining
The currencies of countries regulated by a central bank, in the United States, the Federal Reserve regulate the production of dollars. Unlike many currencies, bitcoin is not regulated by a central bank or central authority, it is a digital currency executed on computers. These high-powered and specialized computers that back up bitcoin are called ‘miners’ because they help guarantee the security and trustworthiness of bitcoin.
Through bitcoin mining, miners keep records of bitcoin transactions and track them to check whether they are secure, accurate and reliable. The information collated by bitcoin miners are presented as a public data and individuals can access. Bitcoin transactions are purchase and sale of bitcoins which are collected to make ‘blocks’ and presented in a public record called ‘blockchain.’
Accuracy of bitcoin transaction is important in bitcoin mining. This is to make sure that the transactions are unique and trustworthy In the transaction of digital currencies, individuals can sell a duplicate of a bitcoin while they withhold the original currency. This can go undetected if the transaction is not verified through a specialized computer by a miner. In the process of bitcoin mining, miners detect duplicate bitcoins and inaccurate ones.
Verifying bitcoin transactions is a complex process which might require that the miner solve many mathematical problems to get the needed answers. Before a miner can add a block of transactions to the blockchain, rigorous work must have been carried out which is why bitcoin miners are given bitcoin when they achieve this.
How Does Bitcoin Mining Work?
Bitcoin mining entails that miners verify bitcoin transactions and proceed by adding the block of transactions to the blockchain. With the aid of specialized computers, the miners are able to solve all the complex problems surrounding the verification of a transaction. A ‘proof of work’ is often made available by miners who have verified transactions. Miners produce a “hash” (a 64-digit hexadecimal number) that must be the same as the target hash or with a little variance. Also, with the help of specialized computers, the hash is produced at a of megahashes (MH/s), gigahashes (GH/s), or terahashes per second (TH/s) based on the unit of the transaction.
However, the chance of a computer producing a hash is estimated as less than 1 in 6 trillion, that is 1 in 6,061,518,831,027. Hence, the more effort put into having a solution, the more critical the problem becomes for bitcoin miners.
Becoming a bitcoin miner is not a simple task, neither is it a day job. Miners always strive to be the first to come up the the right hash, this is because producing the right hash is not enough, but you have to be the first to do it, making competing with other miners an intense task.
Bitcoin mining is highly competitive and requires not just knowledge in the field but a commitment to getting the right answer first before another miner does. To stay ahead of their game, miners often opt for super fast and high-powered computers that will not slow down their pace, but rather help them stay ahead of other miners.
Computer producing companies put more effort in developing specialized computer for bitcoin miners. In 2013, computers specifically designed for mining cryptocurrency emerged. These computers were called Application-Specific Integrated Circuits (ASIC) and different from the old computers and graphics processing units (GPUs)
In recent times, it is difficult to do bitcoin mining or cryptocurrency mining without ASICs. It is practically impossible to compete with millions of miners without these computers. Also, collaboration have begun to extend between miners in which they combine their computing skills and powers to achieve results. Once the result is achieved, the mined bitcoins are distributed.
Reference for “Bitcoin Mining”
Academics research on “Bitcoin Mining”
Majority is not enough: Bitcoin mining is vulnerable, Eyal, I., & Sirer, E. G. (2018). Majority is not enough: Bitcoin mining is vulnerable. Communications of the ACM, 61(7), 95-102. The Bitcoin cryptocurrency records its transactions in a public log called the blockchain. Its security rests critically on the distributed protocol that maintains the blockchain, run by participants called miners. Conventional wisdom asserts that the mining protocol is incentive-compatible and secure against colluding minority groups, that is, it incentivizes miners to follow the protocol as prescribed. We show that the Bitcoin mining protocol is not incentive-compatible. We present an attack with which colluding miners’ revenue is larger than their fair share. The attack can have significant consequences for Bitcoin: Rational miners will prefer to join the attackers, and the colluding group will increase in size until it becomes a majority. At this point, the Bitcoin system ceases to be a decentralized currency. Unless certain assumptions are made, selfish mining may be feasible for any coalition size of colluding miners. We propose a practical modification to the Bitcoin protocol that protects Bitcoin in the general case. It prohibits selfish mining by a coalition that command less than 1/4 of the resources. This threshold is lower than the wrongly assumed 1/2 bound, but better than the current reality where a coalition of any size can compromise the system.
Bitcoin mining and its energy footprint, O’Dwyer, K. J., & Malone, D. (2014). Bitcoin mining and its energy footprint. Bitcoin is a digital cryptocurrency that has generated considerable public interest, including both booms in value and busts of exchanges dealing in Bitcoins. One of the fundamental concepts of Bitcoin is that work, called mining, must be done in checking all monetary transactions, which in turn creates Bitcoins as a reward. In this paper we look at the energy consumption of Bitcoin mining. We consider if and when Bitcoin mining has been profitable compared to the energy cost of performing the mining, and conclude that specialist hardware is usually required to make Bitcoin mining profitable. We also show that the power currently used for Bitcoin mining is comparable to Ireland’s electricity consumption.
Game-theoretic analysis of DDoS attacks against Bitcoin mining pools, Johnson, B., Laszka, A., Grossklags, J., Vasek, M., & Moore, T. (2014, March). Game-theoretic analysis of DDoS attacks against Bitcoin mining pools. In International Conference on Financial Cryptography and Data Security (pp. 72-86). Springer, Berlin, Heidelberg. One of the unique features of the digital currency Bitcoin is that new cash is introduced by so-called miners carrying out resource-intensive proof-of-work operations. To increase their chances of obtaining freshly minted bitcoins, miners typically join pools to collaborate on the computations. However, intense competition among mining pools has recently manifested in two ways. Miners may invest in additional computing resources to increase the likelihood of winning the next mining race. But, at times, a more sinister tactic is also employed: a mining pool may trigger a costly distributed denial-of-service (DDoS) attack to lower the expected success outlook of a competing mining pool. We explore the trade-off between these strategies with a series of game-theoretical models of competition between two pools of varying sizes. We consider differences in costs of investment and attack, as well as uncertainty over whether a DDoS attack will succeed. By characterizing the game’s equilibria, we can draw a number of conclusions. In particular, we find that pools have a greater incentive to attack large pools than small ones. We also observe that larger mining pools have a greater incentive to attack than smaller ones.
The Bitcoin mining game, Houy, N. (2014). The Bitcoin mining game. Available at SSRN 2407834. When processing transactions in a block, a miner increases his reward but also decreases his probability to earn any reward because the time needed for his block to reach consensus depends on its size. We show that this leads to a game situation between miners. We analytically solve this game for two miners. Then, we show that miners do not play a Nash equilibrium in the current Bitcoin mining environment, instead, they should not process any transaction. Finally, we show that the situation where no transaction is ever processed would stop being a Nash equilibrium if the transaction fee was multiplied or, equivalently, the fixed reward divided by a factor of about 12.
Nonoutsourceable scratch-off puzzles to discourage bitcoin mining coalitions, Miller, A., Kosba, A., Katz, J., & Shi, E. (2015, October). Nonoutsourceable scratch-off puzzles to discourage bitcoin mining coalitions. In Proceedings of the 22nd ACM SIGSAC Conference on Computer and Communications Security (pp. 680-691). ACM. An implicit goal of Bitcoin’s reward structure is to diffuse network influence over a diverse, decentralized population of individual participants. Indeed, Bitcoin’s security claims rely on no single entity wielding a sufficiently large portion of the network’s overall computational power. Unfortunately, rather than participating independently, most Bitcoin miners join coalitions called mining pools in which a central pool administrator largely directs the pool’s activity, leading to a consolidation of power. Recently, the largest mining pool has accounted for more than half of network’s total mining capacity. Relatedly, “hosted mining” service providers offer their clients the benefit of economies-of-scale, tempting them away from independent participation. We argue that the prevalence of mining coalitions is due to a limitation of the Bitcoin proof-of-work puzzle — specifically, that it affords an effective mechanism for enforcing cooperation in a coalition. We present several definitions and constructions for “nonoutsourceable” puzzles that thwart such enforcement mechanisms, thereby deterring coalitions. We also provide an implementation and benchmark results for our schemes to show they are practical.