Buy a man a fish, he eats for a day. Teach a man to fish, he eats for a lifetime. This was the thought that kept humming around my head as I learned some of the intricacies of crypto-mining. I began my personal journey into mining bitcoin all the way back in 2012, when I bought a tiny miner called a Butterfly Lab Jalepeno. This little guy plugged directly into the usb and chugged along on bitminter.com at a snails pace.
My, how things have changed! Nowadays, you need to have the most up-to-date systems in order to even have a profitable bitcoin miner! I didn’t have those, so I looked at this as a fun experiment, even hobby.
I decided in August of 2017 to dive back into bitcoin mining based not on just speculation, but for the purposes of this chapter. Last year, I bought a Antminer S1 on ebay ($5, plus $40 shipping!) , but didn’t realize that it also needed a power supply unit to begin mining. Then it sat in my closet for the better part of a year because I didn’t know at all how to use it!
I found a used PSU, again on ebay, for about $60 and began my bitcoin mining adventure. It was a day late and about $1500 short, which is needed for an Antminer S9 that actually makes a profit still.
Mining is difficult work for a computer, so many people point their computers towards a “pool,” which pools miners and then split the profits made from mining blocks. Here are the steps I took to mine my very first bitcoin.
- Attach power supply to unit.
- Plug in the wires to the top of the unit.
- Plug in ethernet cord to router.
- Set up an account at at “pool,” point your earnings to appropriate wallet
- Type in IP address located on the machine into your web browser.
- Set up antminer via web browser.
- Viola! You are mining.
Mining Other Alt-Currencies
Mining alt currencies such as ethereum, dash or monero require expensive mining rigs that utilize graphics processor cards used for playing modern videogames. I am not good, at building computers, so I bought a Ethereum miner on, you guessed it, ebay. Many rigs are homebuilt, so when I saw that it was being built by a company named DigitMint, I jumped at the opportunity.
To form a distributed timestamp server as a peer-to-peer network, bitcoin uses a proof-of-work system. The work in this system is what is often referred to as bitcoin mining. The signature is discovered rather than provided by knowledge. This process is energy intensive. Electricity can consume more than 90% of operating costs for miners. A data center in China, planned mostly for bitcoin mining, is expected to require up to 135 MW of power.
The rule of requiring a proof-of-work to provide the signature for the blockchain was Satoshi Nakamoto’s key innovation. The mining process involves identifying a block that when hashed twice with SHA-256, yields a number smaller than the given difficulty target. While the average work required increases in inverse proportion to the difficulty target, a hash can always be verified by executing a single round of double SHA-256.
For the bitcoin timestamp network, a valid “proof-of-work” is found by incrementing a nonce until a value is found that gives the block’s hash the required number of leading zero bits. Once the hashing has produced a valid result, the block cannot be changed without redoing the work. As later blocks are chained after it, the work to change the block would include redoing the work for each subsequent block.
Majority consensus in bitcoin is represented by the longest chain, which required the greatest amount of effort to produce. If a majority of computing power is controlled by honest nodes, the honest chain will grow fastest and outpace any competing chains. To modify a past block, an attacker would have to redo the proof-of-work of that block and all blocks after it and then surpass the work of the honest nodes. The probability of a slower attacker catching up diminishes exponentially as subsequent blocks are added.
Mining difficulty has increased significantly
To compensate for increasing hardware speed and varying interest in running nodes over time, the difficulty of finding a valid hash is adjusted roughly every two weeks. If blocks are generated too quickly, the difficulty increases and more hashes are required to make a block and to generate new bitcoins.