What is bitcoin mining algorithms

Mining algorithms

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This is a list of the major cryptocurrencies with their key features and workes on different algorithms

Coins	Year	Ticker	Algorithm	Key characteristic
Bitcoin	2009	BTC	SHA-256	The flagman of digital currencies is recognized as one thousand and one pravaselect in the European Union
Ethereum	2015	ETH	Dagger-Hashimoto	The idea of creating the computing power to implement virtually any digital project
Steemit	2016	STEEM	SHA-256	Multimedia content can be integrated with other web hosts
Ripple	2013	XRP	ECDSA	Currency created for banks to make faster and more secure transactions
DigiByte	2014	DGB	SHA256	Designed to eliminate the weaknesses of Bitcoin & Litecoin
Monero	2014	XMR	CryptoNight	Designed for anonymous monetary transactions
Siacoin	2015	SC	blake2b	The main idea of data storage
Litecoin	2011	LTC	Scrypt	Litecoin is a clone of Bitcoin with a faster transactions
Ethereum Classic	2015	ETC	Dagger-Hashimoto	This is the same Etherium, but developers have a conflict, and they divided coin, the price is much cheaper
Dogecoin	2013	DOGE	Scrypt	Completely copied algorithm with Litecoin with some modifications. Popularity due to large investments in advertising and symbol-a picture of the famous dog known and respected in narrow circles
NEM	2015	XEM	blockchain	There is a service of notarization and allows you to make instant payments and money transfers around the world without high commissions. All wallets are protected
Syscoin	2014	SYS	Scrypt	Has an unusual encryption algorithm and is focused on decentralized trade. Syscoin is not a cryptocurrency plus a platform — it is a platform built into a cryptocurrency.
Augur	2015	REP	Smart contract	Augur uses power to predict financial markets
Dash	2014	DASH	X11	Virtually eliminate tracking of the sender. At the request of the user can not be used to tranzactii directly.
Hatch	2018	HATCH	X11	Fork of Dash.
ByteCoin	2012	BCN	CryptoNight	Protect your money the most secure and advanced encryption algorithms. Them impossible to crack. The attempt of hacking would require huge amounts of expensive electricity and computing power of a supercomputer. You are the only one who can get access to your wallet. At least so say the developers
BelaCoin	2014	BELA	Scrypt	Позволяет вам получать оплату за фотографии, которые вы публикуете
lbryCoin	2016	LBC	LBRY	Using lbry users can create and share content such as music, movies, paintings, etc. In the process of downloading content the user may require a fee for access
Radium	2015	RADS	Smartchain	The target is to use the blockchain to provide various 100% decentralized services
Decred	2015	DCR	Blake256	In fact it is a hybrid proof-of-work proof-of-stake (PoW/PoS) consensus-based system that aims to balance between the PoW miners and PoS voters that would create a more robust concept of consensus
Einsteinium	2014	EMC2	Scrypt	Just like kickstarter for science projects
Gridcoin	2013	GRC	BOINC	System that by combining computing power helps to solve problems in medicine, biology, mathematics, climatology, astrophysics and other Sciences
VertCoin	2014	VTC	Lyra2RE	Positioning itself as the fork is fully protected from ASIC miners. Oppose monopolization of mining
Dashcoin	2014	DSH	CryptoNight	Anonymous cryptocurrency the next generation because the network code is always updated with minimal development costs and close to 0% Protocol errors
Potcoin	2014	POT	Scrypt	Is a coiun of legal marijuana industry
Peercoin	2012	PPC	SHA-256	Is interesting in possibility of obtaining coins is not only mining graphics card, but also the generation of new coins with the coins already in the wallet
Namecoin	2011	NMC	SHA-256	The main use of Namecoin is a censorship resistant top level domain .bit, which is functionally similar to .com or .net domains, but does not depend on ICANN, the main governing body for domain names
Nautiluscoin	2014	NAUT	NXT	The target — is to prove that the electronic currency can be a good class of investment assets.
Expanse	2015	EXP	Dagger-Hashimoto	The idea is to use the newest blockchain technology to create anything that can represent the community and the team, using a decentralized Autonomous organization with a self-design to keep it truly decentralized
PinkCoin	2014	PINK	X11	Currency based on the platform Ethereum and securely fixed amount of diamonds
FoldingCoin	2014	FLDC	Stanford Folding	Uses your computer to simulate the process of protein folding in the human body. The results obtained in this study will be used for production and obtaining new medical preparations, methods of treatment and maybe with your help will be open new discoveries in medicine and research protein in particular, and for the treatment of deadly diseases
Navcoin	2014	NAV	X13	If you use NAVTech and Tor you can protect your identity when making private purchases on the Internet.
ViaCoin	2014	VIA	Scrypt	The advantage of VIA is that the confirmation of intellectual property rights and the performance of services is accomplished through publication in the blockchain.
DNotes	2014	NOTE	Scrypt	DNotes — peer-to-peer decentralized cryptocurrency transmitted over the Internet, which enables instant payments to anyone in the world. It quickly and safely with a minimum commission according to the developers
Vcash	2014	XVC	Blake256	Vcash was designed as an innovative and promising. It prevents eavesdropping and censorship, promotes decentralized, energy-efficient and instant network transactions

This is a list of algorithms are used by different cryptocurrencies

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Bitcoin mining

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Bitcoin mining is a transaction record process with bitcoins to blockchain – the public database of all the operations with Bitcoin, which is responsible for the transaction confirmation. Network nodes use blockchain to differ the real transactions from the attempt to spend the same facilities twice. The main mining objective is reaching a consensus between network nodes on which transactions consider legitimate.

Contents

What is Bitcoin mining [ edit ]

Bitcoin mining is the process of issuing bitcoin, built on the calculation of mathematical problems, is the only way to create a cryptocurrency.

The essence of mining is that in different parts of the Earth, there are computers that solve mathematical tasks, the result of which is the creation of bitcoin. The release (production) process is distributed to all participants in the system, which ensures security and is not controlled by a single issuing center.

All Bitcoin transfers are recorded in the public transaction log, they are transmitted to the miners in a chain. The job of which is to pick up one single hash from a million combinations, which would be suitable for all new transactions and a secret key, which is a guarantee of receiving a reward of 25 Bitcoins. At the same time, many “getters” are competing for the award, who are the first to try to figure out the hash. When it is guessed, the block and all transactions are closed and the miners start generating the next block.

An example hash with the same phrases but with different additional parameters (in the example, the last line has the lowest hash value):

The target level of difficulty in the Bitcoin system is recalculated every 2016 blocks (approximately 2 times a week). It can increase or decrease, it all depends on the time of creation of new batches of the block and how much it differs from 2016 minutes (20160 * 10). Regardless of the total power of all miners, 1 block is generated on average within 10 minutes.

The miner’s probability of receiving a reward during these 10 minutes is equal to the ratio of his computing power to the computing power of the entire network. And if this ratio is small, then the probability of receiving an award, even over a long period of time, will be low.

Transaction record process [ edit ]

Besides this, mining is the only way of bitcoins emission that are allocated as a miner reward for the mathematical task solution with the help of computer equipment. The process is advisedly done resource-intensive and difficult to leave permanent the number of blocks found by miners.

Every block should contain the confirmation that the mathematical task has been solved and each of the network nods can easily check, if the block has been really closed by the rules. Emission is decentralized as a reward that means a control absence over the output by a single center. During this process miners confirm accomplishing transactions in the network. In order to protect the network from overruns, mining is possible in strictly defined capacities.

Bitcoins, issued with the help of mining are the best way to hold the transaction anonymity during the work with cryptocurrency. Nevertheless, they can be used only after getting 100 network confirmations.

How Bitcoin Mining Works [ edit ]

All the transfers in the Bitcoin system are public. Miners’ work consists in choosing the right hash, which will be convenient to all the network transactions and will provide getting of the private key. There are millions of possible combinations and that’s why the process usually takes time and demands powerful equipment.

Unknown hash is the quantity that consists of the previous block hash, a random number and transactions check value sum, made during 10 minutes. System conditions can satisfy the only one quantity, which isn’t permanent and changes after each block is closed.

As soon as the right hash is defined the transaction block closes and the miner obtains reward in the amount of 12.5 bitcoins. This process can be compared with lottery, because a lot of participants are simultaneously searching the hash. The system works pursuant to the strict rules and according to them changing of closed block is practically impossible.

Difficulty [ edit ]

Mining difficulty is a dynamic indicator that is periodically recalculated. With an increase in the processing power of mining equipment, complexity grows. It is best to look for up-to-date information on the state of difficulty in mining cryptocurrency on official currency sites. However, this is difficult. Links to mining statistics, even on official websites, are sometimes difficult to find. To simplify the process, aggregator sites of statistical information about all cryptocurrencies have been created. They collect, process and publish relevant data not only about the complexity of mining, but also several dozen indicators: price, capitalization, hashrate, profitability, transaction amount, and so on.

Mining in pools [ edit ]

Bitcoin mining is a very difficult process and it’s necessary to have essential capacities for processing. It has become practically impossible to follow mining alone, because of permanent increasing difficulty of the process and crypto-currency market development. As a result, the concept “pool mining” has appeared, which means the computational capacities banding of several participants in a group for the new block generation. The pool obtained reward for the closed block is shared between its participants.

Equipment [ edit ]

For the long time mining has been available for home computers users, but in 2013 competition between miners for finding the right hash has increased, therefore personal mining has lost it’s economic justifiability. During the development and modernization process the next computer equipment types have been used for mining:

• CPU is a one of the oldest versions working with the help of the computer processor. This option can be found in the main bitcoin client, but it’s off-stream now because of the extra low effectiveness;
• GPU lies in using graphic card. This type of mining has changed the processors. It’s hallmark is the increasing of system power;
• FPGA is an upgrade variant of GPU, which differs by lower energy consumption;
• ASIC is a mining with a special equipment created specially for work with crypto-currency. Its effectiveness far exceeds the attributes of usual graphic cards, so it has inaugurated a new era in Bitcoin development.

Potential investors can use online mining calculators to know the effectiveness and profitability of special equipment like mining farms.

Mining farm [ edit ]

Mining farm – is a data center, technically equipped to mine bitcoins or other cryptocurrencies.

They were emerged as a result of the constant complication of the process, which requires more technical, energy and financial resources.

Farms allow the productivity of computers and, consequently, the Hash Rate to be maximized. The productivity of the largest farms can be several dozen PH/s (1015 hashes/second).

Physically, farms are rooms with a large number of computers and servers that take on tasks for mining.

There are also home-mining farms. They differ from ordinary PCs, by being specially assempled and designed for mining. Home farms can bring profitability, but users often face the problem of excessive electricity consumption and overheating of the computer at home which makes mining unprofitable.

One of the main resources into which a miner has to invest is electricity. It is also a risk factor, since the farm requires a permanent 24/7 power source. In addition, a large number of processors require an appropriate cooling and ventilation system.

Cloud mining [ edit ]

Cloud mining is a process of obtaining Bitcoins with the use of a remote data processing center with the general computational power. This allows the users to mine Bitcoins or alternative crypto currencies without controlling the equipment directly. Most of all, the services of the cloud mining are used by the users from the countries with an expensive electric power supply, which doesn’t allow them to create mining rigs by their own.

Another option is a private virtual service, where a user installs the mining software.

Finally, a user may take the computational powers themselves by using already the results of their work and not coming in touch with physical or virtual servers.

Web mining [ edit ]

Web-mining, or «hidden mining» – is an alternative method of cryptocurrency mining through the web browsers of users of websites. In fact, owners of Internet resources can convert the capacities of visitors’ computers into cryptocurrency.

This method is conducted by special web-miners — programs that can work when the user’s browser is switched on or runs in the background. Technically, such a program can be started on the computer with a line of JavaScript code written on the page, or the code itself is embedded into the browser extension. There are also viruses that make computer capacities work for cryptocurrency mining.

Mining profit [ edit ]

Profitability of mining is the level of reward that a user of the blockchain network receives (providing of his technical capacities for verifying transactions and solution of network tasks, resulting in a new data block on the network).

The profitability depends on two related factors. The first one consists in the complexity of the process itself, on which the reward depends (the more difficult the process is, the smaller amounts of tasks can be made per technical resource unit and, consequently, the less reward you will receive). The second factor is the cost of bitcoin (or other crypto currency). That is, how much your reward is in terms of fiat currencies.

The average annual profitability ranges from 120 to 200% per annum, and for some products in the period of «mining boom» from the end of 2016 showed even the best result. However, this indicator does not take into account additional investments: rental of premises, management of farms and energy costs. Adjusted for these factors in 2016, the profitability of mining amounted to about 10-50% per annum.

Mining Hardware [ edit ]

Specifically for Bitcoin, the number of mining types has significantly decreased. If other cryptocurrencies can still be mined using video cards, processors, hard drives, etc., then the high complexity of Bitcoin mining makes all these methods not only inefficient, but even unprofitable.

CPU [ edit ]

A central processing unit (or CPU) is an integrated circuit that is an essential part of the hardware of a personal computer or any other equipment. Currently, any modern, high-performance computer is equipped with a powerful central processor with a high frequency of operation and several cores. Accordingly, if a miner has a good personal computer, then he will not have to invest hundreds or thousands of dollars in equipment.

GPU [ edit ]

Mining on a video card is the process of mining cryptocurrency using graphic processors (GPUs). To do this, user needs a powerful video card in his home computer or a specially assembled farm of several devices in one system. If miner is interested in why GPUs are used for this process, then the answer is very simple. The thing is that video cards are initially developed to process a large amount of data by performing the same operations, as is the case with video processing. The same picture is observed in cryptocurrency mining, because here the hashing process is just the same. See the main article: Why a GPU mines faster than a CPU.

FPGA [ edit ]

FPGA stands for Field Programmable Gate Array. The microcircuit is a semiconductor. Used in cases where the device is designed to perform logical operations, such as and, or, nand and others.

ASIC [ edit ]

An application-specific integrated circuit, or ASIC, is just a chip designed solely for one type of work – decryption of a specific algorithm. To mine Bitcoins, this is SHA-256. Due to the lack of multitasking, devices show significantly more power than those that are suitable for all algorithms at once.

Mining Hardware Comparison [ edit ]

Hardware	Power	Adaptability	Price	Availability	User Friendly
ASIC	✔️	—	—	✔️	✔️
GPU	—	✔️	✔️	✔️	✔️
FPGA	✔️	✔️	—	✔️	—

To describe the table above, ASIC uses a lot of electricity, has a high price and very user-friendly but the price is expensive and ASIC can’t change the mining algorithm. Meanwhile, GPU is using a fairly low power compared to ASIC, can adapt to various algorithms, cheap compared to other options, easy to get, and easy to use. Finally, FPGA can change algorithm but not user-friendly, you’ll need to be able to create a Verilog program. Also, FPGA was quite expensive and hard to get, but now you can find them easily and cheaply online. In terms of hashing speed, CPU History [ edit ]

Bitcoin’s public ledger (the blockchain) 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. Blockchain mining.

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