Mining Pool payouts explained PPS vs. FPPS vs. PPLNS vs. PPS+

Once a crypto enthusiast is convinced that they are going to take up mining a particular coin, the first thing that they have to decide on is which mining plan is best for their requirements.

There are numerous payment systems (over 15), but the vast majority of the pools operate on a PPS, FPPS, PPS+, and PPLNS basis. However, before trying to understand the different settlement models, it is important to come to a consensus on some terms used in crypto mining.

Block Reward: Block reward refers to the new coins issued by the network to miners for each successfully solved block.

Hashing Power: Hash rate is the speed at which a computer completes an operation in the cryptocurrency’s code. A higher hashrate increases a miner’s opportunity of finding the next block.

Luck: Luck, in mining, is the probability of success. Imagine that each miner is given a lottery ticket for a certain amount of hashing power they provide. If they are to provide 1 TH/s hashing power when the overall hashing power in the network is 10 TH/s, then they would receive 1 of 10 total lottery tickets. The probability of winning the lottery (in this case finding the block reward) would be 10%.

Transaction Fees: Some networks (like Bitcoin) also have substantial amounts of transaction fees rewarded to miners. These fees are the total fees paid by users of the network to execute transactions.

Pay-Per-Share (PPS)

Mining pool payouts explained: Pay-per-share (PPS)

PPS offers an instant flat payout for each share that is solved. Under this payment method, a miner gets a standard payout rate for each share completed. Each share is worth a certain amount of mineable cryptocurrency.

After deducting the mining pool fees, the miners are given a fixed income every day. Therefore, under the PPS mode, the returns are relatively stable. Miners are exposed to risk here. They may not get the transaction fees.

It is ideal for low priced orders for an extended period. This model becomes lucrative during a bearish run of a particular coin.

Pay-Per-Last-N-Shares (PPLNS)

Pay-per-last-n-shares (PPLNS) MineBest

In this case, profits will be allocated based on the number of shares miners contribute. This kind of allocation method is closely related to the block mined out. If the mining pool excavates multiple blocks in a day, the miners will have a high profit; if the mining pool is not able to mine a block during the whole day, the miner’s profit during the whole day is zero.

Notably, in the short term, the PPLNS model is highly correlated with a pool’s luck. If the luck factor of a particular mining pool decreases in the short term, the miner’s income will also decrease accordingly (the opposite case of the mining pool being lucky in the short term is possible too). However, in the long term, the luck factor tends to average out to the mean.

Hence, this model is ideal for fixing orders on a big pool that has a high chance of finding a block within the order time limit. Or a standard order which will have miners connected for a longer time.

Pay Per Share + (PPS+)

PPS+ is a blend of two modes mentioned above, PPS and PPLNS. The block reward is settled according to the PPS model. And the mining service charge /transaction fee is settled according to the PPLNS mode.

That is to say, in this mode, the miner can additionally obtain the income of part of the transaction fee based on the PPLNS payment method. This was a major drawback in the PPS model.

Full Pay Per Share (FPPS)

In this mode, both the block reward and the mining service charge are settled according to the theoretical profit. Calculate a standard transaction fee within a certain period and distribute it to miners according to their hash power contributions in the pool. It increases the miners’ earnings by sharing some of the transaction fees.

With the PPS and FPPS payment methods, you will get paid no matter if the pool finds a block or not. This is the most significant advantage over PPLNS. The risks and rewards are higher with the PPLNS plan.

Different mining pool payouts explained: PPS vs. FPPS vs. PPLNS vs. PPS+

The decision on which mining plan to choose from needs to be preceded by the decision of choosing the right mining infrastructure. MineBest is focused on providing users with complete high-class mining support.

Established in 2017, by Eyal Avramovich, Minebest’s core business involves creating multiple cryptocurrency mining farms that it plans to expand by up to 220 MW. They provide state-of-the-art facilities and infrastructure that are maintained by expert technicians around the clock.

Different mining pool payouts explained: PPS vs. FPPS vs. PPLNS vs. PPS+

Mining Pool payouts explained PPS vs. FPPS vs. PPLNS vs. PPS+

Once a crypto enthusiast is convinced that they are going to take up mining a particular coin, the first thing that they have to decide on is which mining plan is best for their requirements.

There are numerous payment systems (over 15), but the vast majority of the pools operate on a PPS, FPPS, PPS+, and PPLNS basis. However, before trying to understand the different settlement models, it is important to come to a consensus on some terms used in crypto mining.

Block Reward: Block reward refers to the new coins issued by the network to miners for each successfully solved block.

Hashing Power: Hash rate is the speed at which a computer completes an operation in the cryptocurrency’s code. A higher hashrate increases a miner’s opportunity of finding the next block.

Luck: Luck, in mining, is the probability of success. Imagine that each miner is given a lottery ticket for a certain amount of hashing power they provide. If they are to provide 1 TH/s hashing power when the overall hashing power in the network is 10 TH/s, then they would receive 1 of 10 total lottery tickets. The probability of winning the lottery (in this case finding the block reward) would be 10%.

Transaction Fees: Some networks (like Bitcoin) also have substantial amounts of transaction fees rewarded to miners. These fees are the total fees paid by users of the network to execute transactions.

Pay-Per-Share (PPS)

Mining pool payouts explained: Pay-per-share (PPS)

PPS offers an instant flat payout for each share that is solved. Under this payment method, a miner gets a standard payout rate for each share completed. Each share is worth a certain amount of mineable cryptocurrency.

After deducting the mining pool fees, the miners are given a fixed income every day. Therefore, under the PPS mode, the returns are relatively stable. Miners are exposed to risk here. They may not get the transaction fees.

It is ideal for low priced orders for an extended period. This model becomes lucrative during a bearish run of a particular coin.

Pay-Per-Last-N-Shares (PPLNS)

Pay-per-last-n-shares (PPLNS) MineBest

In this case, profits will be allocated based on the number of shares miners contribute. This kind of allocation method is closely related to the block mined out. If the mining pool excavates multiple blocks in a day, the miners will have a high profit; if the mining pool is not able to mine a block during the whole day, the miner’s profit during the whole day is zero.

Notably, in the short term, the PPLNS model is highly correlated with a pool’s luck. If the luck factor of a particular mining pool decreases in the short term, the miner’s income will also decrease accordingly (the opposite case of the mining pool being lucky in the short term is possible too). However, in the long term, the luck factor tends to average out to the mean.

Hence, this model is ideal for fixing orders on a big pool that has a high chance of finding a block within the order time limit. Or a standard order which will have miners connected for a longer time.

Pay Per Share + (PPS+)

PPS+ is a blend of two modes mentioned above, PPS and PPLNS. The block reward is settled according to the PPS model. And the mining service charge /transaction fee is settled according to the PPLNS mode.

That is to say, in this mode, the miner can additionally obtain the income of part of the transaction fee based on the PPLNS payment method. This was a major drawback in the PPS model.

Full Pay Per Share (FPPS)

In this mode, both the block reward and the mining service charge are settled according to the theoretical profit. Calculate a standard transaction fee within a certain period and distribute it to miners according to their hash power contributions in the pool. It increases the miners’ earnings by sharing some of the transaction fees.

With the PPS and FPPS payment methods, you will get paid no matter if the pool finds a block or not. This is the most significant advantage over PPLNS. The risks and rewards are higher with the PPLNS plan.

Different mining pool payouts explained: PPS vs. FPPS vs. PPLNS vs. PPS+

The decision on which mining plan to choose from needs to be preceded by the decision of choosing the right mining infrastructure. MineBest is focused on providing users with complete high-class mining support.

Established in 2017, by Eyal Avramovich, Minebest’s core business involves creating multiple cryptocurrency mining farms that it plans to expand by up to 220 MW. They provide state-of-the-art facilities and infrastructure that are maintained by expert technicians around the clock.

Debunking blockchain myths: part 2

Debunking blockchain myths part 2 by MineBest

The past few years have seen the rapid advancement and further implementation of blockchain technology. But the confusion and misunderstandings surrounding this concept still need to be cleared before the public fully embraces it. Following the first article of the series, we continue to debunk myths and clarify misconceptions surrounding blockchain.

Myth: Blockchain technology is not ready for everyday use

Due to its close association with digital currencies and the recent hype surrounding the highly volatile cryptocurrency market, there is a belief that blockchain is just a new fad among speculators and has no use in the real world.

Fact:

Blockchain technology is being implemented and used daily worldwide. Multiple businesses and industries have adopted it to streamline their operations. Each day, more people interact with platforms and structures that employ blockchain technology.

Blockchain provides solutions for many industries, in applications previously thought to be impossible. A study from the Stanford University shows that this technology has been growing exponentially and has been transforming the infrastructure of various organizations since 2013.

Funding for blockchain startup

Data source: https://www.statista.com/statistics/621207/worldwide-blockchain-startup-financing-history/

The rise in popularity of cryptocurrency services shows the potential for everyday use of blockchain technology. Digital currencies are the original use case for blockchain and although they are not the same, a certain similarity can be observed between them. The world’s most used cryptos, Bitcoin and Ethereum, touched all-time highs in transaction volume in 2020.

Services such as crypto-only online marketplaces and crypto credit cards have taken significant steps in enabling the everyday use of digital currencies. People around the world can now purchase virtually anything they want, at any time, using their digital assets.

Myth: Blockchains require large amounts of energy to run

Blockchain technology, initially implemented for cryptocurrencies, uses a consensus mechanism called Proof of Work. Its use requires expensive and energy-intensive crypto mining equipment.

The Bitcoin network currently consumes the same amount of energy as a small country. This has given birth to the myth that all blockchains require excessive and costly amounts of electricity to run.

Steaming powerplant MineBest

Fact:

It is true that large-scale blockchains like the one used for Bitcoin require huge amounts of energy. This is mainly because they are public, open-source and permissionless blockchains used to mine crypto. But companies looking to adopt blockchain technology do not have to rely on mining.

Unlike permissionless networks, only people with appropriate credentials can access permissioned and private blockchains. These blockchains can operate on the basis of principles set out by a governing body, using a mechanism to validate information called Proof of Authority. This procedure consumes very little energy, often less than the non-blockchain-based system.

Myth: Blockchain is unregulated

The association with cryptocurrencies has led to the belief that blockchain technology is hard to regulate and is risky from a legal standpoint. The majority of cryptocurrencies use public and decentralized blockchain systems, which, until recently, had no clear regulatory guidelines.

Fact:

Cryptocurrency and blockchain technologies are now heavily regulated. Authorities such as FINMA and FATF are leading the way on international blockchain regulation. They have developed government guidelines worldwide, focusing on tax regulations, banking services, transaction monitoring and anti-money laundering policies.

Additionally, blockchains don’t need to be public. Organizations seeking to incorporate this technology into their systems can use a private network set up to comply with laws and regulations, thus minimizing legal risks.

Debunking blockchain myths

Myth: Blockchain is immutable

Immutability is advertised as one of the main assets of blockchain. The feature of distributed ledger means that all transactions, once added to the blockchain, are indisputable and can never be changed.

Fact:

Large networks, such as Bitcoin and Ethereum blockchains, are considered immutable due to their enormous size. But the extent of immutability depends on the size and decentralization of a network.

Having a large user base is essential when establishing an immutable blockchain network. Simply creating a blockchain out of nothing will not automatically make it immutable. Such a feature must be developed through proper planning and infrastructure.

Myth: Blockchain only applies to finance

The financial sector is one of the main industries that can benefit from blockchain technology implementation. FinTech operations are at the forefront of blockchain adoption, with many discussions about its impact on the future of finance.

The recent surge of decentralized finance (DeFi) and the announced interest in blockchain technologies from financial giants such as PayPal and JP Morgan are the hottest topics at the moment. But this enthusiasm for new solutions has also led to the misconception that blockchain can only be used in the finance industry.

Fact:

There are many applications for blockchain technology outside of this sector. New use cases are being proposed and implemented daily. Some notable examples include:

  • Supply chain management: Organizations use this technology to prevent counterfeiting and create a transparent source of information in their supply chains. It allows all parties to identify the chain of custody, ownership transfer and trace their products’ origin in a reliable and efficient way.
  • Maintaining health records: Healthcare providers in countries like the US, Canada and Russia have started using private blockchains to store medical records, monitor disease outbreaks and track medication shipments. Additionally, distributed ledger technology allows healthcare workers to securely and efficiently access their patients’ verified medical history.

Unfortunately, blockchain technology is still surrounded by myths. Debunking these misconceptions and discovering the facts is a continuing duty that we pledge to fulfil, paving the way for blockchain to revolutionize the way we interact with the digital world.

Debunking blockchain myths: part 1

Debunking blockchain myths

The world of cryptocurrencies is ever-expanding, but there is still a lot of confusion about what digital currencies are. With so many tall tales floating around the internet, it is not easy to distinguish between facts and fiction, especially in such a dynamic environment in which new concepts are constantly appearing.

This is the first in a series of articles dedicated to debunking some of the top myths surrounding the new tech-driven buzzword: blockchain. Today, we dive into five of the most common misconceptions regarding blockchain’s origin, uses and potential.

Myth: Blockchain and Bitcoin are the same

Since the launch of Bitcoin in 2009, there has been a widespread belief that the first cryptocurrency and blockchain technology are synonymous. Even today, many people still use these words interchangeably. Nothing could be further from the truth!

Fact: Blockchain technology was invented for Bitcoin. It did not exist before. But it is not a type of digital currency. It is an open-source system that stores information kept on different computers and is interlinked through a peer-to-peer network. In simple words, blockchain is a distributed digital ledger that records transactions that were carried out.

Blockchain stores transaction details, like the amount of cryptocurrency, date and time, type of transfer, in the so-called blocks. Each block is cryptographically connected to the previous one, creating a chronological chain of data. This structure is the reason behind the name blockchain.

It is also important to mention that blockchain used for cryptocurrencies is typically meant to be decentralized. It means that there is no central authority maintaining it. Information stored on the blockchain is distributed across a network of computers. So, it is not legitimately possible to change or remove a transaction once it is recorded on the blockchain.

Last but not least, blockchain technology aims to increase transparency. When it comes to open networks, most of the recorded information is accessible by everyone through platforms called blockchain explorers. Also, there are many analytic tools developed to have several types of in-depth macro and micro-level insights into the blockchain network. So, it is not so difficult to track all the transactions performed on any given wallet.

Myth: There is only one type of blockchain

The concept of a distributed ledger was first developed in 1991. However, most people heard about blockchain technology only after Bitcoin was born. And because it was the first cryptocurrency, many assumed that the public blockchain developed specifically for Bitcoin was the only one that existed. But that is not true!

Fact: There are hundreds of thousands of individual blockchains on the market. Most cryptocurrencies operate on a public blockchain, but there are other types out there. Soon after Bitcoin was released, banks and other private institutions developed a controlled system that required permission to join. This was the beginning of private and federated blockchains.

Over the years, blockchain technology evolved and was adapted to suit an array of sectors and industries. The first-generation public blockchain had several deficiencies like scalability, efficiency, so other blockchains came into existence to overcome these drawbacks. There are currently four types of blockchain networks: public, private, hybrid and federate.

Myth: Blockchain technology can only be used for cryptocurrencies

Blockchain was indeed introduced because of Bitcoin. Since then, it has been widely used in the cryptocurrency industry. But this innovative technology has other applications beyond the cash and payments system.

Fact: Blockchain is a system of recording information and digital assets in a distributed way. It has been developed to solve the problem of double-spending in a decentralized system. But there are other FinTech applications and services developed based on blockchain technology.

Blockchain-based applications, commonly referred to as DeFi, which stands for decentralized finances, provide services similar to conventional financial operations, but without the involvement of third parties or centralized financial institutions. The developments in this space have come a long way. There are DEXs, stable coins, money markets, insurance solutions, financial contracts, and many others that operate exclusively on the fundamentals of blockchain technology.

The beginning of 2021 saw the total value of assets locked within DeFi applications reach a staggering USD 40+ billion.

Myth: Blockchains are cloud-based ledgers

One of the most common blockchain myths implies that they are just cloud-based databases. But even though all network participants have access to the blockchain, the information it contains is not stored in the cloud.

Fact: Blockchains need to be downloaded and run on computers connected to the internet in a peer-to-peer network. Each computer is called a node, and the better the connection of each node, the stronger the whole network. Another difference between blockchain and a cloud database is that it doesn’t store files in a specific format. Blockchain keeps records with a Proof of Existence service that shows evidence that a file exists without actually showing it.

Now, it is important to point out that some cloud service providers have come up with a solution called BaaS (Blockchain-as-a-Service). The idea behind it was to support the development and management of cloud-based networks for companies that develop blockchain applications.

BaaS is very similar to SaaS (Software-as-a-Service) and allows its users to develop, build, host, and operate blockchain apps on the cloud. This technology helps to boost the future blockchain adoption.

Myth: Blockchain can power up the global economy

It is less a myth and more a widespread perception. Many people believe that blockchain is a massive global network, but in fact it is about the size of NASDAQ’s network. It is not equipped to handle as many transactions as most small global financial institutions deal with.

Fact: According to Gartner’s study conducted in 2019, blockchain technology is still about a decade away from the transformational impact. The report states that this technology is not advanced enough to enable a digital revolution across the business ecosystems. There is still time for it to become fully scalable both technically and operationally.

Currently, the most popular blockchain networks like Bitcoin’s are not designed to handle a huge number of transactions made by financial institutions, so it will not take over any time soon.

Busting the myths helps to understand what blockchain is, how it works and see its limitations. Getting familiar with the technology can increase confidence of its users and support the mass adoption of both blockchain and cryptocurrencies.

How big is the cryptocurrency mining industry?

One of the first things many people learn about when introduced to the world of cryptocurrency is mining. It is the foundation that has allowed Bitcoin and other major cryptocurrencies to thrive. In this article, we will discover the global reach of the crypto mining industry and how it may evolve going into the future.

When Bitcoin was first introduced to the world in 2009, anyone could successfully mine it using their personal computer. Over the past decade, this has changed significantly.

As more people entered the space, competition to win those lucrative mining rewards increased. The computational power required to successfully receive a mining reward on the Bitcoin Network is currently astronomical. Bitcoin’s total network hash rate reached its all-time high at the beginning of April with a value of 179.4 EH/s.

This has led to the mining industry now being dominated by big players with specialized mining facilities. It is common to find large warehouses full of ASIC crypto mining machines dedicated to mining Bitcoin.

The cost of running such facilities is not low, with the most considerable expense being electricity. To remain as profitable as possible, the big players in the industry constantly strive to cut down on electricity costs wherever they can. It generally means choosing to set up their facilities in regions with the cheapest electricity.

Mining around the world

The map below created by the Cambridge Center for Alternative Finance in the 2nd Global Cryptoasset Benchmarking Study shows how global Bitcoin mining distribution has trended towards countries with the lowest electricity costs.

The undisputed leader in crypto mining is currently China. Cheap resources and access to inexpensive hydro, thermal, and coal energy have made the country extremely attractive to big players in the industry.

According to the Cambridge Bitcoin study, 35% of all Bitcoin’s hash rate is in China’s Xinjiang region, a region famous for its extremely cheap coal energy. The next biggest region for Bitcoin mining, responsible for nearly 10% of the total hash rate, is Sichuan (also in China), known for its affordable hydropower.

Overall, China controls approximately 65% of the global Bitcoin hash rate.

Although the country is by far the most profitable to mine in, China’s dominance in Bitcoin mining has not always fallen in line with the government’s regulations regarding cryptocurrency.

This uncertainty has meant that other countries have started to attract the attention of mining giants.

Future of mining

Suppose China were to introduce regulations that drive crypto mining out of the country. In that case, some other regions that would become integral to the industry’s future success include North America, Russia, and Kazakhstan.

The popularity of mining in North America is currently on the rise, with the U.S especially aiming to grab a piece of China’s dominance.

Clean and renewable energy use is the critical factor that North American miners aim to use as an advantage. Large companies, such as Tesla, have made it known that they will be more willing to accept Bitcoin and other cryptocurrencies in the future if mining becomes more eco-friendly.

In Russia, as in China, current mining activity takes place in regions with access to cheap energy. Cheap natural gas and hydropower in northern parts of Siberia, combined with the cold climate, make for perfect crypto mining conditions.

ASIC miners produce enormous amounts of heat and require complex cooling systems. Although Russia cannot compete with the cheap electricity currently offered in China, the costs saved on cooling could give them an edge in the future.

The next important player in the future of Bitcoin mining is Kazakhstan.

Kazakhstan is quickly becoming one of the most favorable regions for crypto mining. Its cheap coal energy and regulatory clarity have helped accelerate the growth of mining in the country.

It saw the largest increase in the total share of Bitcoin hash rate in 2020. Estimates show that Kazakhstan’s hash rate share grew from 1.42% to 6.17% in the first half of 2020 alone.

The uncertainty surrounding China’s crypto regulatory policies may encourage companies to move their mining operations to Kazakhstan in the near future, potentially turning the country into the next mining powerhouse.

As the crypto mining industry evolves and adapts, China’s hash rate dominance could start to be rivaled. The mainstream acceptance of digital currencies, strong calls for eco-friendly mining, and more transparent government regulations could restructure the entire cryptocurrency mining industry.

Bitcoin scalability issue: dare to dream bigger

As revolutionary as Bitcoin was in 2009, it was created with a bottleneck. BTC’s role as a peer-to-peer electronic cash system has a finite lifetime. This became clear after the mass adoption of cryptocurrencies and blockchain technology. Its popularity exposed problems with high levels of traffic. In the world of cryptocurrency, this is known as Bitcoin scalability problem.

A victim of its success

It all comes down to popularity. Think of a start-up with a modest budget, like a bakery. This bakery has a website that displays a menu and a gallery full of gooey goodness. The bakery is prepared to serve its community. But then, one day, a celebrity drops by for a donut. The snack is so good that the celebrity shares a photo on social media. Millions of followers then flood the bakery’s website and cause the server to crash. This is essentially what is happening to Bitcoin. But exactly what is the Bitcoin scalability problem?

As revolutionary as Bitcoin was in 2009, it was created with a bottleneck. BTC’s role as a peer-to-peer electronic cash system has a finite lifetime. This became clear after the mass adoption of cryptocurrencies and blockchain technology. Its popularity exposed problems with high levels of traffic. In the world of cryptocurrency, this is known as Bitcoin’s scalability problem PoW blockchain

The scalability problem

Scalability refers to a network’s ability to increase its operational capacity. In Bitcoin’s case, transaction traffic is the root of the issue. More Bitcoin users means more transactions per minute. In December 2020, Bitcoin handled around 330,000 daily transactions. With so much competition for quicker transactions, miners now ask for higher transaction fees. Users who are willing to pay the fees get rapid results. Those who cannot or do not want to pay the fees simply have to wait. In short, the network cannot process all the transactions within a reasonable time while keeping transaction fees low.

Proof of work (PoW) blockchains like Bitcoin were created with a fixed network capacity and a number of problematic protocol rules. BTC’s blockchain transaction typically holds around 250 bytes of data. But Satoshi Nakamoto limited the size of each Bitcoin block to 1 MB. As a result, one block can only include a limited number of transactions. And since new Bitcoin blocks are created approximately every ten minutes, queues of pending transactions are now common. Currently, the only way to bypass the queue is to pay higher transaction fees. But since every user wants the same thing, the fees soon become astronomical.

At present, Bitcoin users must sacrifice speed for affordability and vice versa. It is a compromise that is making expansion slower. But some experts believe these trade-offs are an inseparable part of the blockchain’s DNA.

The trilemma

The industry’s greatest minds see scalability as a significant issue. But one expert has gone a step further, defining a combination of three factors. Vitalik Buterin, the co-founder of Ethereum, formulated the theoretical concept known as the Scalability Trilemma. The theory describes how difficult it is to achieve the three pillars of blockchain sustainability.

  • Decentralization
  • Security
  • Scalability

Buterin believes there will always be a compromise between these three aspects of blockchain protocol. Some blockchains are fast and secure but achieve this by being more centralized. Bitcoin’s blockchain is highly secure and decentralized, but less scalable. At present, there is no perfect solution to the trilemma. But there are some interesting concepts in development.

Solving scalability

As with every problem, there are various scalability solutions currently being explored. Some of these rely on internal changes to the blockchain protocol. Others require integration from the moment of inception. There are also special Layer 2 and sidechain fixes in the works.

  • Segregated Witness

Segregated Witness is a protocol edit implemented to Bitcoin. It removes a certain amount of data from each transaction. This leads to more transactions being included in one block.

  • Masternodes

Due to increased costs and technical complexity, full nodes are declining. Masternodes are an attempt to fill that void. Acting as full nodes, their operators are rewarded for their work. This is much like miners being rewarded on PoW blockchains. The difference is that masternodes are fully dedicated to processing transactions.

  • Sidechains

A sidechain is a secondary blockchain connected to the main one via a two-way peg. Put simply, the two chains are interoperable, meaning that assets can flow freely from one to the other.

Bitcoin solutions

  • Increased block size

Initial solutions for Bitcoin were simple. Due to the 1 MB size limitation, only a limited number of transactions can be included in one block. The obvious thing to do was to increase the size of the block. This was the solution chosen by Bitcoin Cash, which was a Bitcoin fork (a change in the blockchain’s protocol that the software uses to decide whether a transaction is valid or not). For Bitcoin Cash, the block size was increased first to 8 MB and then 32 MB.

However, this solution had one fundamental flaw. The problem would eventually reappear with the future increase in network usage. So, expanding the size of the block is only a temporary solution. Additionally, there are unwanted consequences to increasing the size of the block. This is because bigger blocks make it more difficult to download the blockchain. The general public might find it impossible to run the Bitcoin software in their own homes, which could lead to less decentralization.

  • Shorter confirmation time

Another alternative would be decreasing block confirmation time. However, this idea could make it difficult to confirm that a new block is valid. If confirmation takes too long, it could undermine Bitcoin’s security. This is the solution implemented by Litecoin, Bitcoin’s 2011 fork. New blocks are created within 2.5 minutes, which is four times faster than Bitcoin. But some solutions have an indirect effect on block size and confirmation time.

  • Segregated Witness

Bitcoin attempted to improve scalability by indirectly altering the size of the blocks. It successfully implemented Segregated Witness (SegWit). Together with a soft fork, SegWit increased the size of the blocks by removing signature data from the transactions recorded there. However, the upgrade has not solved the issue.

  • Lightning Network

Special payment channels are another popular attempt at improving scalability. The Lightning Network uses smart contract functionality in the blockchain to enable instant payments across a network of participants. These payments are off-chain transactions. But, again, this solution is far from perfect. For instance, the network requires users to meet certain conditions to use it, such as having a lightning node.

  • Proof of stake

For some time, Proof of Stake (PoS) blockchains have shown promising results. They are already tackling the main scalability issues that PoW faces. Soon, they may bring about the end of PoW dominance. This would profoundly change the industry, since PoS networks require no mining.

Bitcoin scalability issue MineBest 4

Key takeaways

There are many interesting solutions to the scalability issue. The vast majority are fixes to the existing infrastructure. However, the scalability problem exists because the protocol is like a living organism. As the world changes over time, the protocol needs to adapt and evolve. But adaptability only gets you so far.

With this in mind, the best solutions to scalability are always going to be the networks created to overcome the problem. Today’s youth are more technologically proficient than older generations. Likewise, future networks will be more scalable than those created years ago. They will be created to overcome the problem.

Bitcoin scalability issue MineBest 5

This knowledge is a direct result of Nakamoto’s innovation. But pioneers rarely achieve perfection. They signpost a new direction and expose the pitfalls along the way, giving followers the chance to achieve even more. Bitcoin followers can learn from its mistakes. This is the value of the scalability issue – it is the mother of numerous innovations.

Cryptocurrency mining equipment: from PCs to ASIC miners

The concept of mining is a fundamental part of the cryptocurrency world. It occupies the minds of cryptocurrency veterans and recent enthusiasts alike. However, as essential as mining is for cryptocurrencies, the details of this vital function are often skipped over. Let’s take a closer look into the crypto mining process and learn more about the complex hardware behind it.

The basics: Proof of Work

The concept of cryptocurrency mining was introduced by Bitcoin, the world’s first cryptocurrency. It is the process that all current Proof of Work (PoW) cryptos use to secure their network and validate transactions. It involves people worldwide competing to solve complex mathematical puzzles in the form of cryptographic algorithms using computational power.

The cryptographic algorithm used in Bitcoin is called SHA-256. But there are other popular algorithms that alternative cryptocurrencies use. For example, Ethereum uses the Ethash algorithm and Litecoin uses Scrypt.

Each block in a PoW-based blockchain requires solving an algorithm. The incentive for miners to solve these algorithms depends on the block reward. Each block compensates the successful miner with newly created coins and transaction fees. Currently, the block reward on the Bitcoin blockchain is 6.25 BTC.

Once the algorithm is solved, the miner broadcasts it to the network and it is no longer possible for anyone else to get the reward for that specific block. The process repeats for each block. In the case of Bitcoin, it takes approximately 10 minutes to create a block.

It is important to note that only Proof of Work-based cryptocurrencies require mining. Alternative mechanisms such as Proof of Stake (PoS) use a different method.

The mining process – what is needed?

The process of mining cryptocurrency relies on six key elements:

Electricity: Mining equipment runs on electricity and must be connected to the network at all times to maximize potential rewards. So a stable power supply is essential for cryptocurrency mining.

Mining equipment: The raw computational activity of crypto mining is performed by devices such as CPUs, GPUs and ASICs. Mining hardware has evolved rapidly and there are fundamental differences between each type of equipment, more on that in the next section.

Miner software (Mining Algorithm software): Proof of Work cryptocurrencies can use different cryptographic algorithms. Therefore, mining machines’ software must be compatible with the algorithm of the mined cryptocurrency. It is not possible to mine Ethereum using devices operating on Bitcoin mining software and vice-versa.

Mining wallet address: This is the address where the miner receives rewards for successfully mining a new block. It also serves as a way of identifying, although pseudonymously, the miner of a new block. 

Internet: A reliable internet connection is also crucial. After all, everything happens online.

Blockchain network: The final step is to connect to the network and start mining! When the miner successfully solves a block, he it broadcasts it to the network for validation and confirmation from all other participants. Once confirmed, heit receives the mining reward and starts competing to solve the next block.  

Evolution of mining equipment 

As crypto mining is essentially a competition among miners in the network, a person with the most potent equipment will have an advantage and is more likely to receive the block reward.

This competition has led to a drastic change in the crypto mining landscape over the years. Initially, Bitcoin was mined using only the power of a CPU (central processing unit) of an ordinary computer. As more miners joined the network and the competition increased, people quickly discovered that using their GPUs (graphics processing units) could produce far better results.

GPU miners: GPUs’ higher efficiency and computing power made them an obvious choice for miners to use over CPUs. All computers have a GPU installed, so initially, there was no extra hardware required to use a GPU for mining.

However, as time went on, people found ways to increase their mining output and started building GPU rigs.

For a time, they were the number one choice for Bitcoin miners. ASIC machines, created for this specific purpose, replaced them some time ago. However, GPU mining is still around. Some alternative cryptocurrencies use cryptographic algorithms resistant to ASIC machines, so miners rely on GPU rigs in such networks. 

The basic requirements for building and setting up a GPU mining rig include:

  • Mining rig frame or stand 
  • Motherboard 
  • Graphics card 
  • PCI-E Riser
  • PSU – power supply unit 
  • Operating system – Windows/Linux etc.
  • Relevant mining software.

You can find popular GPUs on the market and a list of GPU mineable coins on websites such as whattomine.com.

ASIC miners: The next stage in Bitcoin mining came with the introduction of ASIC miners. As the value of Bitcoin and other cryptocurrencies increased, people began pouring money and resources into developing optimized mining machines that could outperform GPU rigs.

ASIC stands for Application Specific Integration Circuits. As the name suggests, they are designed to perform a specific mission: to solve that mining algorithm! ASICs are exceptionally efficient and capable of producing extremely high levels of mining power. 

Since a single machine can only run for one algorithm, most ASICs are only used for the most popular mining algorithms (e.g., SHA-256).

ASIC machines are readily available with a pre-configured mining algorithm and power supply unit. This makes them more expensive to purchase and power-hungry when compared to their old-school GPU rig counterparts. However, they are far simpler to set up.

A general guide on how to set up an ASIC mining machine can be found here. Most ASIC manufacturers provide an easy-to-follow instruction manual with the device.

A list of popular ASICs and their efficiency can be found at asicminervalue.com.

Cryptocurrency mining has grown from humble beginnings to become a global industry. The competitive nature of the process means that regular advancements in technology and machinery are the norm. Meanwhile, the prospect of being rewarded with increasingly valuable crypto continues to attract miners, who in turn drive the development of faster and stronger computational equipment.

Listen! 10 exciting podcasts about cryptocurrencies

Podcasts about cryptocurrencies are gaining popularity. For many people, they are a fun way to learn about an enigmatic realm of digital assets. Check out our list of the most exciting broadcasts on cryptocurrencies to get to grips with this exhilarating universe.

1. Unchained

Former Forbes reporter, Laura Shin, was one of the first to attempt to explain the world of cryptocurrencies via podcast. Many crypto enthusiasts have heard about Unchained. Shin interviews experts from the cryptocurrency world. Her journalistic approach helps viewers understand how the crypto industry works.

Since her debut in 2016, Laura Shin has recorded hundreds of episodes. She is also working on a book about the history of the crypto space. It may come as a surprise that she claims to be a nocoiner, a person who does not own a single Bitcoin.

2. Unconfirmed

While Unchained may be challenging for newcomers to the world of crypto, there is something for those who prefer shorter, more market-oriented and current events-related proposals. Unconfirmed is Laura Shin’s podcast spin-off. It explores issues related to the institutional players’ cryptocurrency plans or fighting corruption with blockchain technology. It is a good guide to insights and analysis from the crypto industry.

3. The Pomp Podcast

Investor, entrepreneur and podcast author Anthony Pompliano is a big name in the cryptocurrency world. With over 500 episodes on Spotify, The Pomp Podcast focuses on how blockchain and crypto shape the financial sector. Pompliano argues that Bitcoin is the most potent form of money. He discusses his insights and opinions with other business and crypto moguls, such as Binance CEO Changpeng CZ Zhao or entrepreneur and billionaire Mark Cuban.

4. What Bitcoin Did

Peter McCormack is the most tattooed and most devoted Bedford Football Club fan on this list. But not only this makes him interesting. McCormack has a remarkable ability to get peoples’ attention when it comes to cryptocurrencies. What Bitcoin Did explores the technological corners of the world’s most fundamental coin. This podcast is a great place to start for those who want to immerse themselves in the interesting details of digital assets.

5. Untold Stories

Conversations about cryptocurrencies tend to focus on their value. The people who make up the crypto community are often overlooked. That’s what the Untold Stories podcast is about. Charlie Shrem, the Bitcoin Foundation founder, presents personal stories of some of the early leaders of the movement. Known for his knack for having straightforward discussions with his guests, Shrem is one of the most beloved hosts in the space.

6. Bankless

The idea behind Bitcoin’s creation was to allow people to break free from the supervision of banks. Ryan Sean Adams, an entrepreneur and crypto investor, explores this in his podcast Bankless. It is more or less about a man trying to tell his bank that he wants to see other technology solutions and financial services, such as Ethereum and decentralized finance.

7. The Bad Crypto Podcast

Hollywood has yet to make a comedy about cryptocurrencies. However, Joel Comm and Travis Wright have nailed the podcast concept about technological and financial novelties in a light tone. The Bad Crypto Podcast covers blockchain, cryptocurrency, ICOs, altcoins, FinTech and digital money. It is a genuine help for the newbies to follow the latest developments in crypto. And let’s be honest, is there a better way to debunk complex issues than a little humor?

8. A16z Podcast

Mass adoption of cryptocurrencies is a fact. What once served a small group of enthusiasts is now the wheelhouse of large institutions. The A16z Podcast of Andreessen Horowitz, a Silicon Valley-based venture capital company, provides listeners with expert commentary and high-level analysis on investing, entrepreneurship and market news. While it isn’t explicitly focused on crypto, several episodes touch on the decentralized web, covering topics as diverse as crypto art or tokenizing fan communities. Indeed, a bonus is that the program features big-name investors, like Ben Horowitz, Chris Dixon or Mark Andreessen.

9. Bitcoin Audible

How do you recognize a talented podcast host? By their ability to present even the most complicated and technical topics in an enjoyable and digestible way. These are precisely the qualities that characterize Guy Swann, author of the Bitcoin Audible podcast. Not surprisingly, this production shows why you should listen to a podcast about Bitcoin instead of reading about it. Episodes cover topics such as the implications of Bitcoin adoption, mining or the superiority of decentralization over centralization.

podcasts about cryptocurrencies by Minebest

10. Epicenter

And finally, before Bitcoin became cool, there was the Epicenter — the proto-podcast of all the other productions about cryptocurrencies and blockchain. The podcast has been online since 2013. It is hosted by Sébastien Couture, Brian Fabian Crain, Meher Roy, Sunny Aggarwal and Friederike Ernst. The authors lead discussions and interviews with experts, thus exploring the technical, economic and social impacts of the crypto industry.

What’s hidden in Bitcoin block transactions?

One of the fundamental concepts behind cryptocurrencies is that transactions are recorded in blocks stored on the blockchain digital ledger. But what else is hidden inside those registers? Let’s find out.

Thanks to the public nature of blockchain technology, every user can check all transactions ever made with cryptocurrencies like Bitcoin. But when you go to the blockchain explorer, open a random block and scroll down to the block transactions section, you may get a bit lost with all the confusing names and terms. Concepts such as coinbase transaction, hash, transaction fee, public address and multiple confirmations will be covered in this article.

bitcoin block transactions

The meaning behind the data

A blockchain explorer might not be the most obvious thing for newcomers. So, what is the meaning of the information presented in a transaction block?

Starting from the top, the first thing you see when entering a block is a coinbase transaction, which is the first transaction of every block. It is a special type of transaction generated when that block is created. It contains the block reward in the form of newly created coins and transaction fees distributed as compensation to the miner that has successfully established the block.

bitcoin block transactions

Example of a coinbase transaction, Source: click

The interesting fact about coinbase transactions is that they contain no other inputs commonly found with regular transactions.

There is only one coinbase transaction in every block.

Below the coinbase transaction, there are many other regular transactions that were included in a block. And each transaction has its unique transaction hash (TxHash). Also known as transaction ID (TXID), it is a unique identifier that serves as a reference for localizing specific transactions in the blockchain ledger.

TxHash is an alphanumeric code, and every single on-chain transaction has its unique transaction hash. This allows it to be distinguished from other blockchain transactions.

Below is the hash from the first-ever transfer, where BTC was sent from one user to another – from Satoshi Nakamoto, the anonymous creator of Bitcoin, to Hall Finley, an early developer of Bitcoin:

f4184fc596403b9d638783cf57adfe4c75c605f6356fbc91338530e9831e9e16

Pasting it into the Bitcoin explorer will redirect you to that specific transaction with all its details.

bitcoin block transactions

Source: click

As you may notice, the component next to the amount of BTC being sent is the public address.

The public address is a long string of letters and numbers used to receive crypto assets. It is a unique identifier that serves as a Bitcoin bank account number and can be freely shared with anyone.

This is an example of a Bitcoin public address:

1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa

That specific public address belongs to Satoshi Nakamoto. Its first received transaction was 50 BTC as a coinbase transaction from Bitcoin’s first block, also known as the genesis block. The term is used for the block number zero of a particular blockchain.

Keep in mind that while sharing your public address, the whole transaction history can be navigated. For this reason, those who want their identity to remain confidential must avoid linking public addresses with their real-world identity.

bitcoin block transactions

All about transaction fees

The next component that may stand out in a blockchain transaction is the transaction fee. It refers to a small payment to the miner that processed it.

Bitcoin has no intermediaries and transactions are added into the blockchain through the mining process. So, to perform any transaction, a small fee needs to be paid to the miner that will include the data in the block. It is a reward for the miner’s contribution and resources.

Think of transaction fees as a small tip to the miner. And as in the case of tipping, the customer is the one who decides how much it will be. The greater the incentive, the higher the chances that the said transaction will be included in the next block. In simple terms, if you want your transaction to be processed faster, it is going to cost you more.

Transaction costs may depend on network usage. When the demand for transaction processing is high, the fee may increase significantly. As a result, offering a low transaction fee may not be the best solution as it could take a lot of time to get it confirmed and included in the block.

bitcoin block transactions

Tracking a transaction

The last component is the transaction status. It tracks the current status of a transaction, determining whether it has been included in the block.

In every completed block visible on the blockchain explorer, the status is followed by a number of confirmations. The exact amount depends on how many other blocks were created afterwards.

bitcoin block transactions

The example above means that three additional blocks were created after the one in which the specific transaction was finalized.

Platforms such as exchanges or wallets may have different requirements regarding the number of confirmations before the crypto assets are visible.

It is possible to navigate the blockchain explorer using the TxID and check its status. If it says “pending”, it means that the transaction has not been included in the block. This may be caused by the transaction fee being too low.

Terminology related to Bitcoin transactions may be confusing, but hopefully it’s easier to understand now. Be sure to follow our series where we will explain the meaning of other terms related to mining and crypto block terms.

Crypto mining glossary: blocks in blockchain, hash, reward

Blockchain is one of the first terms people encounter when learning about cryptocurrencies. A revolutionary technology set to change the digital world as we know it. But what is it? What does a Bitcoin block look like? This article will take the blockchain apart and explain the meaning of each element.

The concept of blockchain was first presented by Satoshi Nakamoto in Bitcoin’s original whitepaper. He called it a chain of blocks that provides the fundamental infrastructure for cryptocurrencies to operate on a peer-to-peer network. This is a good starting point when trying to fully understand the meaning of blockchain.

crypto mining glossary blocks in blockchain block MineBest

Each transaction recorded on the blockchain is stored in a block. Blocks are timestamped and linked to each other chronologically. They form a chain, hence the name blockchain. It is like a novel. Each transaction is a sentence, each block – a page, and the entire blockchain – a book.

What is a blockchain block?

A block, or data block, is the basic unit that makes up a blockchain. The exact format of the information contained within a data block may vary between different blockchains. However, the basic information it holds remains consistent for all cryptocurrencies.

A block has two parts: the block header and the block body.

  • The block header consists of information that gives the block its identity. It includes the timestamp indicating when the block was created, information about the blockchain software, the hash of the previous block and the current block hash. There will be more about the block hash later.
  • The block body contains transactions, the most important part of the block. The details and fees of all verified transactions are confirmed within the block body. When combined with the block header, a one-of-a-kind block is created. Or a unique page of our blockchain novel.
crypto mining glossary blocks in blockchain MineBest

Block parameters: height, hash and size

Block height

Another term often used when talking about blockchain. If each data block is a page in a book, then the block height can be considered the page number. It is the position of a particular block within the blockchain. It is helpful when using blockchain navigation tools such as blockchain explorers.

Block hash

The fun stuff! If you ever have a hard time grasping a blockchain-related term, that’s the one. We’ll try and keep it simple.

Going back to our blockchain novel example, if the block height is the page number, then the block hash is like the name of the page. Each transaction in the block shares a cryptographical relationship with its block hash.

If someone adds a transaction to the block, the block hash will also change. On a technical level, the block hash is the expression of the cryptographic hash function that maintains the security of the blockchain.

So, we have the pages (data blocks), sentences (transactions), page numbers (block height), and page names (block hash) of our blockchain novel. Is that everything? Of course not. When it comes to blockchain, people always have more questions to ask and new terminology to coin!

Block size

Another common term used in the blockchain. It is the answer to this question: how many sentences fit on a page? Or how many transactions fit within a block?

Every blockchain design provides for a maximum size of each block. This is referred to as the block size and varies from blockchain to blockchain. For example, Bitcoin’s maximum block size is 1MB, whereas Bitcoin Cash’s – 8MB. It doesn’t set the exact number of transactions for each block, as each transaction can contain different volumes of data and take up more or less space within the block. Still, it does indicate the capabilities and efficiency of the blockchain.

Block rewards for miners

Finally, we have the block reward. People get rewarded for validating transactions on the blockchain and creating new blocks. In the context of our blockchain novel, this can be thought of as the payment the author gets.

crypto mining glossary blocks in blockchain block reward MineBest

On the Proof of Work-based blockchains, such as Bitcoin, the miners are the authors and receive block rewards. The mechanism for distributing block rewards is hard-coded into the blockchain. Each added block will distribute rewards to the miners in the form of newly created coins and the total transaction fees of all transactions within the block. 

Blockchain is a complex technology that takes time to understand. In our next blog post, we will examine it even further and discuss how exactly blockchain transactions work! If you want to learn more about cryptocurrencies and the world of digital finance, check out other interesting articles published on the MineBest blog.

Explaining the terms behind crypto mining

Cryptocurrencies have been around since the introduction of Bitcoin in 2009. But people still struggle to understand all the concepts associated with digital currencies. This article takes crypto mining under a microscope to better explain the most popular terms related to this process.

Mining is one of the foundation stones of cryptocurrencies. It is also one of the first terms discovered by the beginners when they start exploring the crypto space. The whole idea may seem a bit difficult to comprehend at first. Especially with other terms associated with it, like hash rate, hash power, nodes and miners. So, let’s start from the beginning!

The meaning of mining in the world of crypto

Mining is a process where transactions are collected in blocks, validated and added to the blockchain ledger. It is carried out by special computing devices called miners. These machines use computing power, also known as hashing power, to solve complicated cryptographic puzzles. Once they are done, the completed block is distributed among other network participants, known as nodes, to verify if it is correct. Then the block is added to the blockchain.

Apart from verifying and adding new transactions to the blockchain, the mining process ensures that the network is secure. It also adds new coins into the circulation in the form of rewards for the effort and resources miners put into work.

Now that we know how crypto mining works, let’s take a closer look at some phrases that appeared in the definition above.

what is crypto mining MineBest

Miners, the machines used for mining

A miner is special device used in the crypto mining process. It is also known as a mining rig or a mining machine. Miners use their computing power to solve complicated cryptographic puzzles and create a block as a result.

In the early stages of the development of cryptocurrencies, anyone could use a regular CPU of a personal computer to mine. But when the demand increased and the whole process got more complicated, special mining machines were introduced. The most popular ones are:

  • GPU miners (hardware equipment using graphics processing unit),
  • ASIC miners (application-specific integrated circuit) designed for the sole purpose of mining cryptocurrencies.

Sometimes the term miner is also used to describe a person who owns and uses the mining machine.

Hash power and hash rate explained

There are two important parameters that relate to the mining machines. They are used to describe how much computational power these devices have.

Hash power

It refers to the computing power of a miner involved in solving cryptographic puzzles. The higher the hash power of the device, the bigger the chance of solving the puzzle and creating a block.

Hash power of a miner depends on its type. Right now, ASIC miners have the highest hash power, so they are the most effective and efficient when it comes to mining.

Sometimes the term hash rate is used interchangeably with hash power in relation to the capacity of the mining equipment. However, there is also a separate definition of hash rate.

Hash rate

A measurement unit of the computing power of the blockchain network. It is the combined hash power of all connected miners. Hash rate is measured in hashes per second (h/s).

Hash rate is the indicator of how healthy the network is. The more miners are connected, the higher the hash power and the more secure the network.

The last word to explain when it comes to mining is a node, whichis a computer connected to the blockchain network. It validates the blocks and transactions against the protocol’s consensus rules. Depending on the node type, it stores the full or reduced version of the blockchain ledger.

Mining cryptocurrencies is a complex process, but hopefully it is a bit easier to understand now. If you would like to learn more about digital currencies, make sure to watch out for the next article. We will explain what a block is and what it holds within. In the meantime, do not hesitate to check out other interesting topics on the MineBest blog!