The other side of the blockchain: how is technology used today?


Not long ago there was a real gold rush around the extraction of cryptocurrencies: thousands of people started digging digital rock to get the precious digital gold while its pace was beating all the records and exceeding all expectations. It all started from the simple mining on users' devices – laptops, personal computers, tablets, etc. – and turned into a complicated sector with a developed infrastructure. Pools were produced miners specialized equipment was produced ( ASIC miners huge mines were created, in which the mining sector was conducted on an industrial scale.The mining activities were even partially passed to the cloud: services appeared that offered cryptocurrency cloud mining without investment, except for financial ones Although the mining sector did not change the structure of the world economy, it is not a common phenomenon. The extraction of cryptocurrencies consumes more electricity than many countries is an example.

Today we will talk about what mining complexity, its function, how it changes, what it depends on and how it can set the tone for the entire cryptocurrency mining sector.

(please, click the topic to scroll to it)

  1. Short review of mining
  2. Comples sity: how it changes and what it depends on
  3. What will you do
  4. Conclusion

1. Brief review of mining

Mining actually means doing calculations to decode a certain algorithm and find its hash. Each mineable cryptocurrency is based on a particular hashing algorithm. When the algorithm is successfully decoded, a new blockchain block is added, a new coin is issued and the miners receive their rewards. Many popular digital currencies can only be issued through mining, it is Bitcoin and its forks, Ethereum, Monero, Litecoin, Dash, Zcash, etc. Some, however, are pre-mined and do not provide mining opportunities, such as Ripple, NEO, NEM, EOS, Tether, etc.

Depending on the hash functions, different devices can be used to extract different digital currencies. Initially all mineable coins, including BTC, were extracted from users' devices (PC or laptop) using the CPU. Today it is not so common and there are some popular coins that still provide this type of extraction. Soon the CPUs did not become sufficient to profitably exploit digital currencies and the miners started using graphics cards to cope with more intensive calculations in terms of resources and increasing complexity.

Later, specialized equipment appeared on the market – the ASIC miners that are used today to extract Bitcoin, as well as other coins, such as Litecoin, Ethereum, Dogecoin, Zcash, Bitcoin Cash, Litecoin, etc. ASIC is a specialized microchip that performs calculations much faster than graphics cards. Although ASIC today is mostly associated with the mining industry, the technology itself was developed at the start of the 80s to improve PC graphics performance. In addition, miners create pools in which they combine their processing power to make mining more efficient for the entire group. The reward for the created block is then distributed based on the processing power provided by each member of the pool.

There is also another data mining solution: cloud mining. The graphics cards and the ASIC miners are quite expensive, more and more of them are required to profit. The equipment needs space to be positioned, it must be connected to the mains, cooled, cleaned, repaired, configured, monitored, etc. Cloud mining involves leasing computing power from companies that manage large mining companies and data centers. Furthermore, cryptocurrency is extracted in other ways, sometimes even illegal. For example, your computer can be infected by a hidden virus that uses its resources to extract a particular currency.

2. Complexity: how it changes and what it depends

Complexity indicates how difficult it is to find the hash. The specified hash parameters determine how hard the calculations must be to find it. The more users there are in the network and the more cryptocurrency is extracted – the greater the complexity. The complexity of Bitcoin is examined every block of 2016 (about 2 weeks) and depends on how much time has been spent to extract the previous blocks of 2016.

What is the function of complexity? Bitcoin is designed to add every new block on average in 10 minutes. This can vary from one cryptocurrency to another (2.5 minutes for Litecoin and up to 20 seconds for Ethereum). The amount of processing power in the network can change dramatically over time – when Satoshi Nakamoto pulled out the first BTC, there was only one device in the network, probably a laptop or a PC. Today we have huge industrial farms with thousands of special mining devices.

To ensure the stability of the generation of new blocks, the cryptocurrency software automatically makes it more or less difficult for the miners to find the hash. So, if there are more miners and the computing power of the network increases, it is more difficult to find the hash. If the power decreases, it becomes easier to do all the necessary calculations. This is how the system remains sustainable: no matter how much processing power is in the network it will still take about 10 minutes to generate a new Bitcoin block. At the beginning of 2010, the complexity of Bitcoin was just over 1, while in 2013 there were already 3 million. Today it has already exceeded 7 trillion.


So, every block of 2016 (about every two weeks), Bitcoin corrects its complexity, so that each block is generated in about 10 minutes, regardless of the number of miners in the system. Other mineable cryptocurrencies have the same role for complexity and are similarly implemented.

3. What will happen to the mining industry in the future

Mining is no longer the same as it used to be – says … everyone. While some digital currencies can still be extracted using PCs, it is quite difficult to join the "extraction" of most of the leading currencies. To start extracting Bitcoin today you should have … started the Bitcoin extraction a few years ago. The same thing is happening to other digital currencies, and the ASIC miners are in fact to blame. They are able to make calculations faster and more efficient and wherever they go in the mining market, the total complexity increases and CPU / GPU-mining retires. However, some still manage to make money with mining. There are still those coins that are not extracted using the ASIC miners, which means that you can still undermine their laptops or PCs.

In any case, one thing is clear: today, mining is no longer synonymous with easy money, and the market is taken over by large, "professional" miners, who extract digital coins on an industrial scale. The industrial mining sector is associated with a whole series of logistical, legal and resource problems. Until recently, most Bitcoin miners were in China, but last year the government banned ICO, the trade in cryptocurrencies and mining. Another thing is energy consumption. The calculations require a lot of electricity, so the miners are looking for countries with lower energy prices.


Another problem is the obsolescence of the equipment. Many industrial miners have discovered that the hardware used for the 2017 BTC can not guarantee the same profit in 2018.

So, mining becomes less profitable and new members do not have the ability to easily enter the market. This has led to the fact that the extraction of better coins becomes much less popular. Non-tiny coins and those that still provide mining can benefit from them. For example, in 2017 there was a boom for mining browser extensions (like Coinhive). Of course, Bitcoin or Ethereum mining on browsers seems rather strange, but there is another relatively popular coin, Monero, which still offers such an opportunity.

4. Conclusion

Thus, complexity is one of the key categories that form a technical structure of minutable cryptocurrencies. Written in the protocol, it helps the blockchain to remain sustainable in terms of the time it takes to generate new blocks. The complexity depends directly on the number of miners in the network and, consequently, on the total processing power. Most of the major cryptocurrencies have already become much more difficult for me and this is obviously an ongoing process. There are more users, more special equipment and more industrial-scale industrial miners that make extraction unavailable to average users.

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