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The dramatic fluctuation of cryptocurrency prices has redesigned the IT security landscape. Hardware and software engineers create programs and machines to calculate cryptocurrencies, even if hackers try to collect them. In this series, I will explain the economy of cryptocurrency and how people profit from it.
A brief introduction to cryptocurrency
The most famous cryptocurrency is Bitcoin. In his whitepaper, Bitcoin's creator (s), under the name of Satoshi Nakamoto, described Bitcoin as a distributed database among participating computers that tracks ownership transitions between accounts. The transitions are recorded as blocks and the chronology of the transitions is hash and connected, forming a blockchain. All participating computers, or "nodes," are supposed to use the longest blockchain as history, which is shared consent. With the hash of historical data and most nodes that accept to use the longest blockchain, it is mathematically difficult to falsify transactions or create a different transition history. This solid foundation allows Bitcoin and other cryptocurrencies to track ownership and property transitions. In other words, there is no physical currency: the entire database keeps track of the properties and transitions owned by bitcoins.
To keep track of all transitions, the Bitcoin network needs nodes to calculate the transitions hashes. The Bitcoin network motivates the nodes by assigning a certain number of bitcoins to a node that calculates the hash that is "best" according to a standard. The more compute power a node contributes to the Bitcoin network to calculate the hashes, the greater the chance that this node will win the prize. This is called proof of work (PoW). Other cryptocurrencies use different mechanisms such as pole testing (PoS). The calculation of hashes for a cryptocurrency "extraction" network is also known. Some believe that the analogy derives from the fact that finding the best value of hashes in the vast mathematical space is similar to the extraction of gold in nature.
The Computing Power Arms Race
PoW turns bitcoin mining into a computational power competition. With more computing power, it is possible to calculate multiple hash and nbsp values; and has a better chance of winning the bitcoin reward. People build powerful machines to calculate at higher speeds. When bitcoin was introduced for the first time, nodes running on laptops and PCs could extract bitcoins using their central processing units (CPUs). Subsequently, clusters of computers and cloud servers joined them, followed by field-programmable gate arrays (FPGAs) and graphics processing units (GPUs). In the end, dedicated processing chips called application & nbsp; specific integrated circuits (ASICs) have been created for the sole purpose of mining. Machines that use ASIC to calculate hashes are called miners or miners.
Each miner consumes thousands of watts of power, which makes energy consumption the largest continuous cost for people trying to profit from the mineral cryptocurrencies. Companies build containers that contain hundreds of miners and ship them to locations around the world where they can find low-cost electrical supplies and good network connections. It is not surprising to find mining facilities located in data centers. To some extent, cryptocurrency mining structures are data centers, except that they are dedicated to a type of calculation: hashing.
When miners' containers are sent to mining facilities and inserted into the network, they must become part of the entire cryptocurrency network. Miners are not talking directly to the cryptocurrency network. Instead, talk to a website called a mining pool. The pool collects hashing jobs and distributes them to each miner and verifies if the job was successful. The more miners connect to a pool, the more hashes can be calculated from this pool and the greater the chances that this pool will find the best value hash & nbsp; and be rewarded with the cryptocurrency. If a pool wins the prize, all miners working for the pool will have a quota.
A mining machine can connect to multiple pools. When a pool does not send a hashing job to a miner, the miner can talk to other pools and get new hashing processes. This gives the miners the ability to distribute their computing power to different pools and not be blocked by a single pool.
Cost of cryptocurrency mines
When extracting for cryptocurrencies, there are three main costs that come into play:
1. Fixed costs such as the hardware, the land and the building.
2. Maintenance costs such as staff salary and network bandwidth.
3. Cost of energy.
Among the three, the cost of energy is the most significant. For example, with Bitmain's AntMiner S9, an S9 will draw 13,140 kWh in the year. If we use the national average power of 0.1262 USD / kWh, the annual energy cost is $ 1,658.27. Other costs, such as land, construction and maintenance costs, can be distributed between each unit. The change in the cost of electricity is often the deterministic factor in determining whether a mining plant can make a profit.
In order to make profits, crypto miners are constantly looking for low energy rates all over the world. The attackers are also trying to dump the costs to other people. In the next article I will explain how hackers use existing devices to collect cryptocurrencies without paying the price.
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The dramatic fluctuation of cryptocurrency prices has redesigned the IT security landscape. Hardware and software engineers create programs and machines to calculate cryptocurrencies, even if hackers try to collect them. In this series, I will explain the economy of cryptocurrency and how people profit from it.
A brief introduction to cryptocurrency
The most famous cryptocurrency is Bitcoin. In his whitepaper, Bitcoin's creator (s), under the name of Satoshi Nakamoto, described Bitcoin as a distributed database among participating computers that tracks ownership transitions between accounts. The transitions are recorded as blocks and the chronology of the transitions is hash and connected, forming a blockchain. All participating computers, or "nodes", should use the longest blockchain as history, which is shared consent. With the hash of historical data and most nodes that accept to use the longest blockchain, it is mathematically difficult to falsify transactions or create a different transition history. This solid foundation allows Bitcoin and other cryptocurrencies to track ownership and property transitions. In other words, there is no physical currency: the entire database keeps track of the properties and transitions owned by bitcoins.
To keep track of all transitions, the Bitcoin network needs nodes to calculate the transitions hashes. The Bitcoin network motivates the nodes by assigning a certain number of bitcoins to a node that calculates the hash that is "the best" according to a standard. The more compute power a node contributes to the Bitcoin network to calculate the hashes, the greater the chance that this node will win the prize. This is called proof of work (PoW). Other cryptocurrencies use different mechanisms such as pole testing (PoS). The calculation of hashes for a cryptocurrency network is also known as "mining". Some believe that the analogy derives from the fact that finding the best value of hashes in the vast mathematical space is similar to the extraction of gold in nature.
The Computing Power Arms Race
PoW turns bitcoin mining into a computational power competition. With more computing power, you can calculate multiple hash values and have a better chance of winning the bitcoin reward. People build powerful machines to calculate at higher speeds. When bitcoin was introduced for the first time, nodes running on laptops and PCs could extract bitcoins using their central processing units (CPUs). Subsequently, clusters of computers and cloud servers joined them, followed by field-programmable gate arrays (FPGAs) and graphics processing units (GPUs). In the end, dedicated processing chips called Application-Specific Integrated Circuits (ASICs) were created for the sole purpose of extracting mineral resources. Machines that use ASIC to calculate hashes are called miners or miners.
Each miner consumes thousands of watts of power, which makes energy consumption the largest continuous cost for people trying to profit from the mineral cryptocurrencies. Companies build containers that contain hundreds of miners and ship them to locations around the world where they can find low-cost electrical supplies and good network connections. It is not surprising to find mining facilities located in data centers. To some extent, cryptocurrency mining structures are data centers, except that they are dedicated to a type of calculation: hashing.
When miners' containers are sent to mining facilities and inserted into the network, they must become part of the entire cryptocurrency network. Miners are not talking directly to the cryptocurrency network. Instead, talk to a website called a mining pool. The pool collects hashing jobs and distributes them to each miner and verifies if the job was successful. The more miners connect to a pool, the more hashes can be calculated from this pool, and the greater the chance that this pool will find the best hash value and be assigned to the cryptocurrency. If a pool wins the prize, all miners working for the pool will have a quota.
A mining machine can connect to multiple pools. When a pool does not send a hashing job to a miner, the miner can talk to other pools and get new hashing processes. This gives the miners the ability to distribute their computing power to different pools and not be blocked by a single pool.
Cost of cryptocurrency mines
When extracting for cryptocurrencies, there are three main costs that come into play:
1. Fixed costs such as the hardware, the land and the building.
2. Maintenance costs such as staff salary and network bandwidth.
3. Cost of energy.
Among the three, the cost of energy is the most significant. For example, with Bitmain's AntMiner S9, an S9 will draw 13,140 kWh in the year. If we use the national average power of 0.1262 USD / kWh, the annual energy cost is $ 1,658.27. Other costs, such as land, construction and maintenance costs, can be distributed between each unit. The change in the cost of electricity is often the deterministic factor in determining whether a mining plant can make a profit.
In order to make profits, crypto miners are constantly looking for low energy rates all over the world. The attackers are also trying to dump the costs to other people. In the next article I will explain how hackers use existing devices to collect cryptocurrencies without paying the price.
