Blockchains, Merged Mining, ASICs: Lingo You Need To Know About Cryptocurrency Mining

&ldquo,The ASICs are coming, the ASICs are coming!&rdquo, is the sob heard te most alternative-cyptocurrency forums lately. Everyone has an opinion &mdash, merged mining is the way forward, Scrypt-N is the reaction, Myriad makes far more sense.

It&rsquo,s effortless to get lost te the lingo however. Don&rsquo,t get left out with this handy reference guide. Here are seven terminologies which should help broaden your understanding.

Block Chain

One of the most common misconceptions about Bitcoin and other cryptocurrencies is that they are a lump of code that gets passed around &mdash, if you own some, then thesis coins are &ldquo,stored&rdquo, on your hard drive. However, this is totally false, a result of applying concepts of a physical coin to a crypto omschrijving.

All cryptocurrencies are ter fact just a public ledger of transactions: who sent coins, and who received them. The wallet is a chunk of software which contains both a public address, and a secret key. It scans the public ledger for transactions relating to itself, and builds up a picture of how many coins that address has received. Only the person with the secret key has the authority to send coins from that address &mdash, but you can actually peer into any address to see how much they have, since all the information is public.

This public ledger of transactions is called the &ldquo,block chain&rdquo,, and overheen time it grows te size since it necessarily contains the details of every transaction everzwijn done on the network. At blockchain.informatie, you can see te real time spil Bitcoin transactions occur, or type te an address to see the current value held te that address.

Mining a coin is the process of securing the block chain by finding a solution to a mathematical equation (a hashing function) performed on the previous block: like looking at a pagina of gegevens and signing it to say, &ldquo,this is onberispelijk&rdquo,. Since each block adds to a chain and depends upon the last, a chain is created ter such a way that any manipulation of the transaction history would be instantaneously detectable: you can&rsquo,t switch the block chain history, and that&rsquo,s what makes a crypto-currency work.

51% Attack

At any point ter time, a cryptocurrency network has a given hash rate &mdash, that is, the total computational power of all the devices presently mining that particular coin. The thickest slice of this hash rate pie is wielded by mining pools: a collective of users who have pooled together their hashing power ter order to increase their chances of finding the next segment of the block chain. Here&rsquo,s an example for Litecoin (from litecoinpool.org):

The 51% Attack is so-called because anyone who takes 51% or more of the total network hashing power can embark lounging about transactions that occur on the network: they can &ldquo,dual spend&rdquo, the coins they own while ter control. Note however that they can&rsquo,t create coins out of skinny air &mdash, just mess around with their own transactions and slow down others. Either way, it&rsquo,s a mess.

That&rsquo,s not to say anyone who takes 51% of the hashing power will necessarily attack a network by spreading false information: chances are they hold a vast amount of that currency anyway, so causing the currency to collapse and demolish the value is fairly detrimental for them too. It is simply that they could.

Many will rechtsvordering the 51% attack is actually a very low risk, yet many smaller coins have already bot killed uncountable times before. It is a very real risk &mdash, particularly for a currency like Dogecoin Dogecoin: How A Meme Became the 3rd Largest Digital Coin Dogecoin: How A Meme Became the 3rd Largest Digital Coin Read More which has ter equal parts those who love it and those who scrupulously despise the adorable meme rear end.

ASIC &ndash, Application Specific Integrated Circuits &ndash, are machines made to do one thing and do it indeed well. Bitcoin ASICs come ter many forms now, but all of them are better than a regular rekentuig at mining Bitcoins by a factor of thousands. This means that mining using a regular rekentuig is loss making. You can still attempt mining for Bitcoins today with your everyday pc, but you&rsquo,ll be paying more te tens unit costs than you would be receiving ter Bitcoins.

Litecoin (How to get embarked mining Litecoin A Utter Guide To Getting Began With Mining Litecoin A Total Guide To Getting Began With Mining Litecoin Read More ) came along to solve this: it switched the core hashing algorithm used to secure the block chain, so those same machines that had bot purposefully built to mine Bitcoins just wouldn&rsquo,t work on the Litecoin network. It wasgoed said to be &ldquo,ASIC-proof&rdquo,, particular due to the high memory requirements of the fresh Scrypt algorithm. This wasgoed only going to work for so long tho’: anywhere there&rsquo,s money to be made, people will find exploits.

Scrypt ASICs do exist, but the current generation aren&rsquo,t that much better at mining than high end graphics card, and still use a fair bit of energy. Added to low availability, they&rsquo,re not a serious problem yet. But fatter and better ASICs most certainly are coming, likely by the end of this year.

The threat of thesis ASICs is very debated, and I won&rsquo,t pretend to know the answers. The general overeenstemming is that bringing ASICs into a network is good, but only after a certain point. Before that point te time, the objective is to bring spil many people into the currency spil possible, and making mining a realistic possibility for anyone with just a regular PC. Once the currency usage is established, ASICs can help to take the flow off and secure the network. Just not te the early stages, when it kills off the community.

Some are just outright against the idea of ASICs at all, and will zekering at nothing to prevent them from becoming a reality. Bringing the discussion around to the early lifecycle of currencies like Dogecoin, ASICs present a very real possibility of someone performing a 51% Attack &mdash, abruptly, a phat amount of hashing power is available, which can be targeted at a puny coin, and ruining it. The discussions therefore turn to ways of combating or preventing ASICs from working with an alt-coin entirely.

Merged Mining

The creator of Litecoin recently met with the creator of Dogecoin (a Litecoin derivative). He suggested a &ldquo,merged mining&rdquo, treatment. The mining output would be checked against both block chains, like buying one lottery toegangsbewijs that&rsquo,s valid ter two countries. Miners could receive both Litecoins, and Dogecoins. Ter terms of hash power, it means you combine the power of the Litecoin network with that of the Dogecoin network &mdash, the two fattest Scrypt currencies today. Ter theory, this would provide a very first line of defence against 51% Attacks for either coin, since it would now be more difficult than everzwijn to control that much power on the network.

There are various arguments for and against this budge, so I&rsquo,ll leave you to read up on those yourself. The budge isn&rsquo,t unprecedented however: Bitcoin can now be merge-mined with Namecoin (NMC), however the latter is a P2P-based DNS system rather than a stringent crypto currency. Ter fact, if you register at ManicMiner, you can already do some merged mining at the same time with Five different Scrypt coins &mdash, tho’ the extra coins are basically worthless te terms of dollar trading value.

Scrypt-N

Also known spil &ldquo,Adaptive N-factor&rdquo,, Scrypt-N is a modification of the original Scrypt algorithm that makes it use incrementally more memory, since ASICs are designed with a specific implementation of Scrypt te mind, and with a immovable amount of memory. The next increase ter N-factor stops existing ASICs from working. Vertcoin wasgoed built around this, but there&rsquo,s nothing to zekering other presently Scrypt based coins from adopting the algorithm.

Myriad

Myriad coin came up with a unique response to the problem: use all the algorithms. Work is split evenly inbetween no less than Five different hashing algorithms, each with it&rsquo,s own difficulty: you can mine it with an ASIC, graphics card, or CPU.

Hard Fork

A hard fork is what happens when a coin determines to update or switch the core algorithm used to mine, or switch the wallet software ter which balances are kept. The updated software will work spil expected, and proceed down the onberispelijk block chain, while the outdated software (including end user wallets) will proceed to work with the old fork. However, the two aren&rsquo,t compatible: if two users remain on the old fork, they can perform transactions, but those transactions wont carry into the updated block chain.

Eventually, everyone will have switched overheen, which means transactions on the wrong fork will be erased. Clearly, this is a confusing and messy state of affairs, which is why hard forks are to be avoided unless absolutely necessary, and every effort needs to be taken to get word out of an update.

I hope you feel more certain now to engage ter and understand discussions about the future of cryptocurrencies. Alternatively, you could just rant ter the comments about how Bitcoin is just a big pyramid scheme or about spil useful spil Monopoly money.

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