Complete Explanation Mining Bitcoin (Bitcoin Mining) – Miner Role And Function – Hardware – Energy Consumption – Pool Mining
Complete Explanation of Bitcoin Mining . Bitcoin is heavily dependent on this mining process. Because with mining done by miners Bitcoin (miner) will validate every transaction, build and store the new block into blockchain. To save the new blocks into the Blockchain, miners must reach consensus.
Actually EB has covered most of this Bitcoin mining topic. But then it becomes even more intriguing to repeat this discussion, because many misconceptions about Bitcoin mining.Many people assume that all Bitcoin-seeking activities are mining Bitcoin. Like looking for Free Bitcoin via faucet, giveaway, play game gets free Bitcoin, post can bitcoin, considered mine. Hopefully with this explanation it can give meaning “mined Bitcoin” real.
In the discussion ” Complete Exploration Mining Bitcoin ” will be discussed in full, and is divided into 5 parts:
1. The Role And Function Of Miners
2. Hardware Mining Bitcoin
3. Energy Consumption and Mining Ecology Bitcoin
4. Understanding Mining Pool
1. Role and Function of Miner (Miner)
Bitcoin Mining is actually a mine activity using a particular device. The process through solving a series of mathematical problems (puzzles) based on certain difficulty levels. Well this activity is called “Mining” or cool term is “Bitcoin Mining”.
So clearly, that if someone is mining Bitcoin, that means the person is using a mining device. Can use CPU, GPU, FPGA, and ASIC . An explanation of this device will be discussed in the next section.
Mining actors, referred to as “miners”, or the cool language is “Miner”. Well, sometimes, we also still leave the question, what exactly is this miner Bitcoin doing?
Let’s discuss it. Bitcoin mining process is similar to mining of precious metals such as gold.It’s just the difference, if Bitcoin mining is done digitally to solve the puzzle, and gold mining through gold mining process.
Being similar, because sometimes there are miners who feel loss, because it can not and difficult to find gold, and some are successful. However, the real picture is, there will be many difficulties when doing the mining process.
Likewise with Bitcoin mining. There are a series of difficulties and challenges faced. As for being a miner, then we must be connected into the Bitcoin network. Once connected, then we will be a “node”. The term node describes all devices connected to the Bitcoin network.
So what are the miners doing? When someone connects to a Bitcoin network using a device, the node will perform a series of tasks. The tasks performed are:
- Listening to deals
All nodes that are connected in the Bitcoin network must listen to all transactions that occur. Followed by validating the audited transaction. By checking the digital signature. It is related to the truth of digital signatures and the output included in the transaction must be completely un-spent (not yet issued in other transactions-ensuring no double spending) .
- Keep Blockchain and listen to the new block created.
A miner, actually serves to keep the blockchain. Related to handling all transactions that occur. Miners too, will retain Blockchain which has kept all transactions. Miner, can request all history of the block to another node that has entered before it entered into the network.Listen to new blocks that are broadcasted within the network, then validate the received blocks. Because in the block there is a series of transactions, then every transaction that is in the block and even then also must be validated, and valid.
- Create a new block candidate
Once we have a full copy of the block chain (blockchain), then we can start building blocks.To do so, by grouping all the transactions we hear into the new block, which can later expand on the block we know. However, we must also ensure that all transactions within the block are valid.
- Finding Nonce to be a valid block
After we validate all transactions in the candidate block, then is looking for nonce in order to make the block become valid. The step here is the most difficult step faced by miners.
- Hope Blocks are accepted
This is the second difficulty encountered. So if we find a new block, there is no guarantee that the block will be part of the blockchain consensus. Miners need luck here. Expect other miners to accept the proposed block. So we can start mining above the block. So not on other miners’ blocks.
- Receive Advantages
If it turns out that other miners received our block as a valid block, then this is the moment that makes the miner smile satisfied after doing the hard work. Because if our block is received, it will get a reward of 25 Bitcoin (which is still valid at this time). In addition, if several transactions within the block are listed transaction fees, the miner can collect all the transaction costs.
Well, these six things are things that must be done by the miners. So obviously yes, that mine was not interpreted as in the search for Bitcoin in faucet, giveaway or the other.However, mine here yes means using a certain tool, which in the process of doing the six things mentioned above.
Let’s continue again. Of the six things, we can classify in two ways.
1. Some of those tasks are to validate the transaction
Serves to help Bitcoin network as a most important function for Bitcoin and Blockchain system can continue to run and exist. So miners, is the main thing that will run all the Bitcoin protocols.
2. Other tasks to compete with each other to find new blocks and make a profit
Why race each other? because basically, this is the most difficult. In addition, it is also associated with the reward incentive block that will be accepted. For those who managed to find new blocks. So it is likened to a race to find and find new blocks. And the incentive given, used as a stimulus of the miners in doing his work.
Then how can i find a valid block? to answer this question, it will be related to the Nonce that must be found in order to be a valid block. We need to understand that in each header block, it will point to the previous block header. And within each block, there will be a merkle tree of all transactions inside the block.
Miners, first compile a set of valid transactions, owned from the pending transaction pool (pool of pending transactions or so-called mempool ) , then entered into the merkle tree.
Well, in this case, a miner can enter many transactions, until the whole reaches a total of less than 1megabyte (current block size limit) . Then, create a block header that shows the previous block.
In this block header, there is a nonce size of 32 bits. So the miners can try this nonce many times. The goal is to find one that can cause the hash of the block to be below the target . Usually to start trying the nonce, can be started with a value of nonce 0. Then the miners can try in succession with the increase of the number until managed to find a nonce that will be able to make a block to be valid.
Generally miners will try every possible value from bit 32 for the nonce. However, there may not be a single one that can generate valid hashes. Well, in casuistic like this, usually the miners will make a change.
The change is a change to the Coinbase transaction, which allows miners to change the value of 32 bits. Because there is an additional nonce in the coinbase transaction. After changing the additional nonce in the coinbase transaction earlier, the miners can start looking for nonce again in the block header.
If you have made a nonce change in the transaction coinbase, then all merkle tree must also change. Why is that? Because the nonce changes will spread to all paths in the merkle tree. So, it can be said that additional nonce changes, its nature as if more difficult than changing the nonce in the block header.
Why is it more difficult? because miners so much time to change the nonce in the block header. It could be that, when it has finished changing the nonce in the block header, they have not been able to find a valid block. That’s why this extra nonce conversion is even more difficult. Although it can be done as an alternative way, if you can not find the possible value in 32 bit earlier.
Although difficult and most probably will not work, but if the miners try to keep trying, it may be able to find a proper combination of additional nonce in the coinbase transaction.So the nonce in the block header can generate the correct hash below the target. If the miners can find out, the miners can immediately to announce, and hope to be accepted to get rewards.
Then there is the question that arises:
- What target actually explains the hash target must be under the target?
- Do all miners solve the same puzzle?
- If one miner managed to solve, would the fastest miner always win to find the next block?
The 2nd and 3rd answers are “No”. It is impossible for miners to work on the exact same block. Since the blocks are one with the other, of course there will be a different order of transactions. So of course the puzzle is not the same. And most of all, if there are two miners working on blocks whose transactions are identical though, the blocks will remain different.
In a coinbase transaction, miners will determine their own address within the coinbase transaction. This address will make changes to the roots of the merkle tree. So it is certain that no two miners are working on the same puzzle. Unless they share public key. Sharing or sharing this public key, in mining can be done if both miners are part of the same pool mining. So between the two will be able to communicate with each other, whether they include a different nonce in the transaction coinbase. The goal is also to avoid duplication of workmanship.
Well on answer number 1 on target, this will relate to the difficulty level. Let’s discuss it.
Degree of difficulty
What is the difficulty level for finding valid blocks? All we have to remember is that miners will try to get the diiginkan. Ie the hash value must be lower than the target. Say, the miner is trying to find the hash of the block + random number in base16, which is lower than the target.
Target -> as described at the beginning, relates to the difficulty level. While this target is bit 256 on base16. So this target will be lower in value, so the level of difficulty will also increase. So that means, the level of difficulty is the lower the value of the target. Up here clear yes? Let’s continue in more detail.
Take, for example, at one time the difficulty level in hexadecimal is:
or if in a converted base10 is:
If the miners get their hash in base10:
then that means the miner is unsuccessful, and should try again, try again, and again, until he finds a value lower than his target.
Determination of Difficulty Levels
The difficulty level will change each time until 2016 blocks. The time range is approximately 2 weeks. The change of difficulty level, adjusted from how efficient the miners during the previous 2016 block period. So this kind of calculation of the difficulty level in mining Bitcoin:
x = (y * 2016 * 10 min) / (z)
x = Next Difficulty Level
y = Difficulty Level Previous
z = The time taken to mine 2016 the last block
10 minutes = average creation time of 1 block
In the above calculation, 2016 * 10 minutes will result in exactly 2 weeks time. So that 2016 block will be created later will take approximately 2 weeks. The effect of calculating the above difficulty level changes, determining the scale of difficulty level that might account for a block being found within the network. That is in the average time of 10 minutes.
Each Bitcoin miner will calculate the level of difficulty. And it will only accept blocks that meet the criteria at the level of difficulty they can count. Miners who are in different branches, may not count the same difficulty value. But basically every miner in mining over the same block will agree on the degree of difficulty. So as to enable the achievement of consensus within the network.
Bitcoin’s mining difficulty will continue to increase. But the increase will not always be stable and linear, but depends on the activities of its miners, also on the situation in the market. There are several factors such as how many new miners are joining. So it could affect the exchange rate of Bitcoin at the time.
As new miners join the lot, and the mining level is further supported by the emergence of more efficient devices, blocks will be found more quickly. So the level of difficulty was so increased. Then the time it takes will always be around the average in 10 minutes to find and create a new block.
What if in finding blocks, it takes an average of more than 10 minutes?
If this happens, then the difficulty level will drop. Thus, the average conditions for the creation of new blocks within 10 minutes, will affect whether the difficulty level will rise or fall. For example, if the average creation of blocks in 2 weeks is faster or less than 10 minutes, then the difficulty level will increase and adjust. But if the average is greater than 10 minutes, then the difficulty level will decrease.
2. Hardware Mining Bitcoin
As mentioned earlier, that to do Bitcoin mining, it takes a hardware to do calculations or computations in solving puzzles. Along with the development of the era, and the increasing difficulty level, the computing power also increasingly supported also with the development of this hardware.
Calculation in mining using SHA-256 hash function. This SHA stands for Secure Hash Algorithm. At the time Bitcoin was created by Satoshi Nakamoto, choosing to use SHA-256, of course because the best hash function that can be used at that time is SHA-256.
SHA-256 is a family in SHA-2. There are some similar ones in SHA-2 as in SHA-224, SHA-384, and SHA-512. While at SHA-256 there are 256 bits. Each function can operate on 32 bit words. So it can accommodate 32 bit hardware. This 256 number comes from 256 bit stateand output . In the next development, has appeared SHA-3 family. But still not used in Bitcoin.
Miners, should be able to calculate this function as soon as possible. So the miners will compete with each other. The faster, the more profits they can get. Well, now let’s see some kind of mining device that can be used to mine Bitcoin.
Mining Bitcoin With CPU
The first time Bitcoin starts running, the device used can only be done by using the CPU on a regular computer. Of course, it’s because the level of difficulty at that moment is still low is not it. So mining using this CPU is considered to be the first generation of Bitcoin mining devices.
At that time, it could be said that the miners were only looking for more linear nonce with SHA-256. And check next, if it has produced a valid block.
The question is, how fast if Bitcoin mining is done with CPU? If the computer used is a high end computer in the present time it is likely to be approximately 20-25 million hashes per second, in units of MH / s. And when compared to the current level of difficulty, it may take several thousand years to find a valid block. So mining with this CPU really has become quite difficult.
Mining using the CPU, is no longer profitable in the present. For people who have done mining using a CPU, it certainly will feel disappointed, because they also do not know exactly how to work Bitcoin.
Mining Bitcoin With GPU
The next second generation, the miners began to use the GPU. A graphics card is almost used in all types of computers today. This GPU can produce high parallelism, and can be quite useful in terms of Bitcoin mining.
Bitcoin mining can be paralleled, so miners can also try to have hashing at the same time with different nonce. When OpenCL began to be released in 2010, it was possible to run many different types of calculations faster on a graphics card. It is also the case that in the end it opens the opportunity to do Bitcoin mining through GPU.
A graphics card has properties that can be considered quite attractive. Easy to use, even amateur people will be easy to make initial settings of this graphics card. Buying a graphics card is also quite easy to find in the market.And one major benefit is, graphics card is also good for Bitcoin mining.
Why is it good? Because the graphics card can work in parallel, which can be used as a simultaneous calculation in SHA-256. In fact, some types of GPUs also have specific instructions for being able to perform quite useful operations on SHA-256. And one more interesting, because most graphics cards can be overclocked, though also quite risky if too forced. Errors can occur when performing SHA-256 calculations using this overclocked.
Mining with this GPU can be modified in such a way. So the miners can make and design some GPUs in one motherboard. In fact, many miners also make similar designs, using many GPUs that are combined in a set of motherboards. So the whole GPU can also be used together in mining Bitcoin.
One example of this GPU assembly can be read here: Create Your Own GPU Mining Rig
GPU there are advantages, of course there are also shortcomings. GPU requires a lot of power. So that electricity consumption also become big. In addition, the cost to assemble the GPU is also quite expensive, especially if you intend to use a lot of graphics cards. And many coolers are not described good specifications to support the performance of this GPU.
Mining With FPGA
FPGA stands for Field Programmable Gate Array . FPGA is a digital IC that is widely used to implement digital circuits. The Bitcoin miners started switching a lot using FPGA, when the GPU started to be abandoned a lot.
At that time, many were using Verilog, hardware that was designed using FPGA. Basically FPGAs appear in Bitcoin mining just as many early miners switched from CPU to GPU.It aims to be able to do Bitcoin mining as much as possible.
On this FPGA chip, it allows its users to customize and reset its configuration. Basically FPGA can offer better performance than graphics card. Especially with the discretion to configure the settings. In addition there is also a cooling FPGA that can facilitate the process works.
With this FPGA, miners can also assemble the device with a cleaner and tidier when compared with the GPU. The use of FPGA allows it to reach up to GH / s, or approximately one billion hashes per second. However, if the miners have hundreds of boards each 1GH / s at this time, it may take an average of 50 years to find a new Bitcoin block.
Therefore, many consider the use of FPGA is still less effective. Because the increase was felt only slightly when compared with the GPU. In addition there are some disadvantages also in FPGA. The disadvantage is that many have been damaged when used for Bitcoin mining. FPGA in Bitcoin mining did not last long. Just a few months. Much longer on the GPU which at that time can reach up to 1 year. A few months after many are using FPGA, then ASIC appears.
Mining Bitcoin With ASIC
At present, mining has been dominated by ASIC. ASIC is a special chip to do certain work. ASIC or stands for Application-Specific Integrated Circuit is specifically designed to be able to do Bitcoin mining.
There are many great vendors that sell to consumers with different types and types. Of the many different types, there are various levels of computation, and the amount of power consumed. So that miners can have each type of Asic.
Asic design process requires expertise and product excellence that can last long. Even so, Asic for mining Bitcoin is indeed designed and created quickly. Some analysts say that asic vendors even produce the fastest ASIC in the history of integrated circuits. Especially on handling the problem when the product is in the hands of consumers.
Most of the Asic products in the first generation, there are many bugs and most also do not provide the proper numbers and performance. But then Asic has become the most reliable in the present.
Until 2014, the Asic term is short enough because it has increased quite rapidly which increases the hash rate of the Bitcoin network. Asic growth period in the first era lasted in six months. During this time, most of the profits that have been made exist in the first period. A miner’s fraction can make up half of the expected profit on the life span of Asic within the first six weeks of its use.
So in this case, the speed of product delivery from vendor to consumer hand becomes an important factor to generate profit in mining. Despite the immaturity in Asic’s production process, customers often experience bottlenecks in late delivery of products. So often come late and almost obsolete when Asic products are received in the hands of consumers.Meanwhile, the growth rate of Bitcoin hash has been stabis. But in the early era will seem many customers who feel frustrated and many who assume has been deceived by the vendor.
In the history of mining Bitcoin, the economy in its mining is still not profitable for small miners to be able to do mining. Especially to be able to buy mining equipment and start profiting from it.
In fact, many people who have made the purchase order of this mining device will lose money, if based on the calculations they make when deciding on the purchase order. In addition, Bitcoin mining also seems to be a gamble related whether the price of Bitcoin will rise or not. For many miners, although they can make a lot of profit from mining Bitcoin, it would be better if they had just taken advantage of it to immediately purchase mining equipment, then invest in Bitcoin, then sell it for profit.
Although the miners can immediately order the mining device, but it is not too good if they do not know in detail about Bitcoin and cryptocurrency. Currently, most Asic products have been sold commercially. It is almost impossible for these products to be purchased from mining products, because there will definitely be electricity costs as well as power requirements for cooling.
List of Asic Hardware Can Be Seen Here: List Hardawre ASIC
Bitcoin Mining Large And Professional
It can be said that currently Bitcoin mining has moved from individual mining into a large and professional mining center. These large Bitcoin mining companies mostly operate not openly, to protect them and maintain them competitively.
There are three things that become factors for setting up a Bitcoin mining center. Three important things are climate, electricity cost, and network speed. So in particular, it would be better if the mine was done in a climate that digin in order to reduce the cost of electricity consumption for cooling.
The problem of cooling system is certainly a challenge in Bitcoin mining. Meanwhile, of course many who hope that the cost of electricity is cheap. And also a fast network connection to connect to other nodes in the Bitcoin network faster too.
The Evolution of Bitcoin Mining
In the mining of Bitcoin there has been a slow evolution. Starting from mining with CPU, switching to GPU, then to FPGA, and until now has been dominated by ASIC. While this is the same happened evolution in gold mining.
In the evolution of gold mining, begins with mining individuals who use pots to gain gold.Switch then using boxes that use the floodgates, and proceed by using explosives on the hillsides by groups of gold miners. Until then began the occurrence of modern gold mining that does a giant mining and has made a big hole in the earth.
Based on these two mining evolutions, there is a decline in individual roles that are equally declining over time. Turning to the dominance of large companies to make a bigger profit.However, there is another pattern that shows most of the benefits gained from the sellers of mining equipment.
What will happen to Bitcoin mining in the future? Currently Asic mining has become the only realistic way to be able to do mining and gain profit. However, mining with Asic has also been unfriendly, especially to small miners.
If there is a question that questions, then what is the point of decentralization if in the end every individual is finally eliminated? Would it be possible to return to a one that might combine the two? Is it true that the birth of the Asic mining and the emergence of these large mining centers have broken the original vision of Bitcoin?
In cryptocurrency, there may be a cycle that may recur. And it can be seen the tendency with the appearance of Altcoin. Where a cryptocurrency other than Bitcoin appears and is still free from big investors. But of course with the start and price levels are still much smaller compared with the current Bitcoin.
There is a condition that can be utilized when Asic is still not available on the new Altcoin.And mining will probably continue the history of the CPU to the GPU, then from GPU to FPGA, and back to the Asic mining. But it certainly will also be risky, about whether the new altcoin will be successful or not later.
3. Energy Consumption and Mining Ecology Bitcoin
The emergence of a large mining center professionally makes the mining dominance of Bitcoin. It seems exactly the same as gold mining. Especially, how is the role of large companies in gold mining that has caused much damage to the environment.
While in Bitcoin, it probably will not be that big as the impact. However, Bitcoin mining also requires enormous energy. Indirectly, it will also affect the currency, as well as the environment.
There is a law of physics known as Landauer’s principle, by Ralph Landauer in 1960. In the laws of physics it states that any non-reversible computation would require a minimum amount of energy. Logically, any irreversible computing is considered to be a loss of information. Especially, in the principle of the laws of physics, states that every bit will consume at least (kT In 2) joules. Where K is a constant Boltzmann, or approximately 1.38 × 10 -23 J / K. There, T is the temperature of the circuit in Kelvin size, and In 2 is the usual algorithm of 2, or approximately 0.69. This small sum is the amount of energy per bit. From this law of physics, explaining that a computation, will require energy that can be calculated per bit.
While SHA256, there is a presume is not a reversible computing. Described in the laws of physics above, that any non-reversible computing will require energy, and SHA-256 is used as a basis for Bitcoin mining. So that means, Bitcoin mining computing also requires energy.
Then how can Bitcoin need energy?
Bitcoin mining, can not deny it will consume energy consumption. Although, the amount of energy used is still far from the total electrical energy used in the world today. But the reality is Bitcoin mining does require electrical energy.
On the mining device would need to be produced. Both when still in the form of physical raw materials, then turn them into Asic mining devices. And from the process will also require energy. As for the delivery of finished products Asic devices to consumers, also consume energy in the delivery. Then, continuing again after the device is used for Bitcoin mining, computing devices will also consume energy.
From the level of energy consumption that has been going on in Bitcoin mining today, many expectations will be able to lower the level of energy consumption. Especially in the Bitcoin mining process. Let’s take a closer look at the level of energy consumption in Bitcoin.
As explained above, that when Bitcoin mining is done will consume electricity, ie electricity.Likewise, when using Asic devices. In the development of mining devices, you can say there is a decline and the effectiveness of the use of electrical energy.
But when Asic comes in, although in the end there is the development of Asic devices that allow to consume less electricity, but it can be said, because Asic also hash rate in Bitcoin network increased rapidly. And it also implies an increase in electricity consumption for Bitcoin mining.
There is a review of research conducted by Sebastian Deetman about the power consumption of mining Bitcoin. And also the relation to the environmental impact that can be caused. The review can be read more here:
For a miner, surely it should be able to calculate how much power is available in the mining device. Simultaneously, also calculate the cost of electricity that will be needed. In March, electricity tariffs in Indonesia fell, although slightly. Approximately electricity tariffs in March 2916 and then as follows:
Electricity Tariff March 2016: Rp 1355 / kWh
The group of tariffs that enter this group:
- Small household R1 / 1300 VA
- Small household R1 / 2200 VA
- The household is being R2 / 3500-5500 VA
- Large household R3 / 6600 VA and up
- Midsize business B2 / 6600 VA-200 kVA
- Government is P1 / 6600 VA-200 kVA
- Street Lighting P3
Suppose we use the Antminer S7 for $ 597 ( $ 7,960,645.88 – the price at the current amazon) , 4.73 TH / s with 1210 watt power consumption. To calculate it, we can use the following formula:
So on the use of Antminer if full working within 1 month non stop, it will require the following power:
1210/1000 x 24 x 30 = 871.2 KWH.
If the electricity tariff is Rp 1355 / kWh, then the total cost of electricity in 1 month is:
1355 × 871.2 = Rp. 1,180,476, –
Of course, the amount is only calculated from the amount of electricity consumed on the Asic device in Antminer S7 only. It still does not include the calculation of the cost of the PC or laptop power used, or also additional cooling that will be used if necessary. Similarly, the connection fee used to connect devices on Bitcoin network.
If we try to calculate again the amount of Bitcoin that can be produced, we can also do the calculation, here’s how to calculate it:
HashRate Asic Antminer S7: 4,73 TH / s
Difficulty Current: 194254820283.44403
Bitcoin Price ($): 455.4 USD
Electricity per KWH (convert to $): 0.09 USD
Difficulty: 5% (2 weeks)
Pool cost (antpool): 2.5%
The data we enter into the mining calculator to calculate the range of what can be in the mining. The result is as follows:
Hours: $ 0.12
Day: $ 2.82
Sunday: $ 19.77
Month: $ 84.71
Year: $ 1,030.64
You can try the calculation by entering the above information data on the mining calculator below:
From the example of the calculation of electricity costs and the range of mining results above, we can judge that the magnitude of the electric power also affects also the mining pattern, as well as on the mining results that can be obtained. Within a month of nonstop device usage, between the results obtained with the cost of electricity is also not too big difference. Of course, it is in accordance with the electricity rates in Indonesia. Net profits will be obtained, if it has been mining for about 7 months, then even then can cover for the cost of purchasing the device.
Meanwhile, within a period of 7 months, the miners also do not know what will happen.Suppose that there is a device malfunction, the price of Bitcoin is down, the cost of electricity may increase in the next 2 months, or anything else.
This cooling is considered an important component in Bitcoin mining. And in practice it will also consume electrical energy. If you do not use it, then certainly will cause damage to the mining device used.
But if Bitcoin mining is done in small sizes, the cost for this cooler may also be small and usually underestimated. Unlike the case if mining is done in large sizes such as a large Bitcoin mining center professionally. This cooler is quite influential and will also cost a large power consumption.
4. About Understanding Pool Mining
The first thing we need to remember, that in mining Bitcoin, done by random process (random). Miners will never know when he will find the next block. If the miners can not find the next block, then the miners did not get anything.
If a miner looks at block distribution, and wants to see how many blocks you want and can be found in the first year, there will be a high variant. While the number of possible blocks can be found also low. So, if we imagine as a small miner. The possibilities of it seem to make miners small to have few options available.
Starting from the many difficulties faced by small miners, as well as the various risks faced, then many of them who then work together and form an insurance company to alleviate the risk.
Initially a mining pool is formed because of the pattern of cooperation. So a group of miners join together and form a pool that serves to be able to do Bitcoin mining together.By specifying a designated coinbase receiver. The receiver, called the Pool Manager.
So, with this mutual mining, no matter who finds a block, that pool manager will eventually receive reward rewards. Furthermore, from the results received by the pool manager on the reward block found, will be distributed to each participant. And the pool, probably cut some of that amount as a fee for the pool service that each miner uses.
The assumption is that when a miner joins the pool mining, the miner also trusts the pool mining manager. So with the pattern of pool mining, small miners also have the opportunity to keep doing Bitcoin mining.
The question is, how does the pool manager know exactly the amount of computing power of each miner, and how much has each miner produced? Then how can the pool manager share the revenue equally in each miner?
To answer some questions above, there is a solution that can answer it. Miners, can prove how many roles have been contributed in the pool during mining by calculating the output of the stock, or the nearest valid block. Let’s be clear about this.
Suppose the target is a number beginning with 67 zeros. Hash a block must be below the target number to block it into a valid block. In search of a block, the miners will look for block hash with many zeroes in front, but not to number 67, because the target should be below it. Miners can start to search for the nearest valid block to prove that they have indeed been working on the search. A stock may require about 40 or 50 zeros. It also depends on the miners in the pool.
Meanwhile, miners will continue to search for new blocks with hash blocks that are below target. In the search process, maybe they will find another block whose hash block contains fewer zeros. Yet it is still quite difficult to be able to prove that they have actually worked.
The pool manager runs the bitcoin node on behalf of the participant. Then collect the transactions and assemble them into blocks. The pool manager also includes their address in the coinbase transaction and sends it to all participants who are members of the pool. To prove that all participants have worked, they send out shares. When members in the pool find a valid block, the participant sends it to the pool manager.
In this case, participants who have found the new block are not given any special bonuses.So if other miners do more work from other miners in the pool, then the miners will be paid more. Although the miner was not the one who invented the new and valid block.
Suppose that in pool mining there are three participants who are equally working on the same block. All three are given rewards that are commensurate with the amount of work that has been done each of the three participants. Although one of the participants found a valid block. One of the miners was paid for doing a lot of work. And usually there is no special bonus for who managed to find a valid block.
There are few options that can be done by the pool manager in calculating how much reward given to participants based on the shares they send. In general, we will have two simple choices.
Pay Per Share
In this model, the pool manager will pay the participants flat at each time sending shares on certain difficulties that have been worked on a block. So the miners can send their shares to the pool manager and get paid directly without waiting for the pool to find a block.
In some ways, this pay per share model is the best model for miners as participants in pool mining. So the miners will be guaranteed the money that can be obtained every time the participants find the stock of the work. While the pool manager will absorb all the risks that exist to pay the benefits, even if the block is not found.
Therefore, as a result of these risks, on the pay-to-share model, pool mining will charge a higher cost when compared to other models. While problems may arise on this model, miners do not fully have the incentive to send valid blocks.
That is, participants in the pool can get rid of valid blocks found, but still have to pay the same rewards, and this can be detrimental to pool mining. Potentially, unreliable pool managers may attack pools to compete, and try to drive participants out of the pool business.
In the proportional model, do not pay participants on a flat per share. The amount of payments a participant receives depends on whether the pool has found a valid block. If the pool finds a valid block, then the results will only be distributed to the members, in proportion to how much work has actually been done.
In the proportional model, the miners sometimes still bear the risk of pool mining in general. But if the pool is large enough and many of its miners, then some frequent pool variants can find the blocks to be quite low, so the risk is also low for the pool manager.Because they only pay when they find a valid block.
Proportional models will also experience problems as well as in pay per share patterns. A miner’s incentive to send a valid block is found, will trigger its earnings. So in this model, the pool manager will work more to verify, calculate, and distribute its wages. In addition to the two common models that exist in the pool there is another pattern, namely pool hopping.
Miners may be able to move between pools at different times. Let’s say that a proportional pool can be effective for paying per share if a block is found within a short period of time.Then it will pay the result of the block reward, no matter how long the next block will be found.
Meanwhile, a smart miner, might try this proportional pool of mining early in the cycle before the block can be found. While the stock return is relatively high to switch (hop) to pool pay per share in the next cycle. When the expected benefits from the proportional pool mining are relatively lower.
Finally, a pool that runs a proportional pattern is not entirely practical. In more complex schemes such as pools with pay per share, a number of new shares are delivered. This is quite common, but in this case, in this pool the participants will also move frequently. This makes pool schemes vulnerable to different types of manipulation.
Start there Standardization
Mining pools first appeared in the GPU mining era in 2010. Then it became quite popular for obvious reasons. Lower the variants of the miners in order to participate. But nowadays it has become quite sophisticated. There are many pool mining protocols run. Even suggesting this pool protocol can be standardized to be part of Bitcoin. Similarly, the Bitcoin protocol for running peer-to-peer networks.
The pool mining protocol provides an API to communicate between the pool manager and the participants. The pool manager can send a message to all participants regarding the details of the block being worked on. Then the miners sent back messages related to the stocks they found.
Getblcoktemplate (GBT) has been formally standardized as a Bitcoin Improvement Proposal (BIP). Then there is another competing protocol, called Stratum . This protocol, has now become more popular in its implementation. And it has been proposed also in the BIP, but unlike the Bitcoin protocol itself. Especially associated with a slight discomfort in some pools. Every poool mining can only choose which protocol they like, and the market itself that defines.
While in some mining hardware, even also have supported this protocol. So that will limit its flexibility. But with this it will also make it even simpler for a miner, when starting to buy the hardware, and can easily join in pool mining. Just connect the device, start to connect to the pool and can directly start mining.
51% Mining Pool
In early 2015 most of all miners began to do lots of mining in pool mining. So the miners who do solo mining getting fewer. In June 2014, one of the largest pool mining, Ghash.io, has nearly 50% capacity in the Bitcoin network. Because Ghash tried to offer a lucrative offer to the miners who wanted to join in it,
This then creates fear, because it will potentially mastery the network, and began to arise any reaction to Ghash. Then in August 2014, the Ghash stock market immediately stopped accepting new entrants. Still, the two quarries control about half of the power inside the network.
Continued in April 2015, the situation began to look a little different, and dominance began to fade a little. When pool mining can acquire 51 percent in the network will be of special concern. While publicity over the issue of Ghash becomes pool mining trying to avoid problems. So nothing similar happens.
Today, miners and pools have successfully entered the Bitcoin exchanges and the pool protocol has also increased the ease of participants to more easily switch between the other pools. So pool mining has become dynamic. But it will still have to get attention in its long-term development.
Advantages and Disadvantages of Pool Mining
Keep in mind pool mining may be hiding over the actual mining power they have. A number of large mining organs may participate in some mining pools to hide their true size. And in Bitcoin this is called mining laundering hashes .
Up here, is pool mining a good thing? The advantage with pool mining is that mining will be easier to run. Including opening up opportunities for small miners to participate and engage in Bitcoin mining.
Without pool mining, small miners will be more difficult to do mining. Another advantage of pool mining is that there is one central pool manager in the pool network. Managers are tasked with block assembly and also make it easier to upgrade their network. Like upgrading its pool mining software. That way, all the participants in it can update the software used.
While the main disadvantage of pool mining, of course, could potentially be a form of centralization. And this becomes a big question, related to how much computing power that big pool mining operators have. Just like what happened in Ghash.io. Although miners can be free to leave the pool and switch to another pool, it is unclear and can be calculated how often miners do it.
Another disadvantage, with the existence of this pool mining, will decrease the miner population that actually runs full node. Because before, all miners, whether miners big or small, they run their own node nodes to validate. And they also have to store the entire block chain, and validate each transaction.
Now, some miners have rarely done so, having entrusted the task to the pool manager. And the miner level drop that runs full node, will have a major impact on the Bitcoin system.Moreover, if there is centralization within the Bitcoin network.