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Cryptocurrency Mining: Explained

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Ever given a thought to how cryptocurrencies actually come to exist? How does one actually get them onto a server? How does one actually introduce them into the network for community users to buy, sell and trade? The heavy energy and resource consuming process which is required to obtain these cryptocurrencies is called mining, which is why we say that one has to ‘mine’ their cryptocurrencies.

When it comes to cryptocurrencies, there is no central body to issue new notes or mint new coins. A cryptocurrency exchange has no such system of single point of authority.

 

Blockchain and Cryptocurrency mining

The technology of Blockchain supports virtually every cryptocurrency on the digital world. It is a decentralized shared ledger of each and every transaction that ever takes place on the network. The genesis block is the first block to record the first transaction made over the network. As and when newer transactions take place, they get permanently logged onto newer ‘blocks’ which are then chronologically added in a linear fashion onto the pre existing chain of blocks thus forming an ever growing chain of blocks called the blockchain.

In order to create a new block with all its legitimacy intact, a cryptographic hash is included. To arrive at a hash matching the right criteria, all one needs to do is calculate as many hashes as possible and then wait until one hits a match. Upon hitting the right hash, new blocks are formed and the reward of this computational process is given in the form of the cryptocurrency involved to the miner who founded this block.

In even simpler terms, mining is just the process to produce or create cryptocurrencies. The computer processing power enables mining, which is basically a record keeping service. A network of nodes on a distributed network race to solve a heavy mathematical puzzle using the trial and error method. The first computer to successfully solve the puzzle is known to “mine” the cryptocurrency. Higher is the computing power contributed from your side, larger is your reward.

 

Obtaining mining hardware and power supply

One first needs to decide on what hardware equipment they wish to use to mine their cryptocurrency. All these mining equipments are very expensive and one needs to make a sound intelligent decision before making a purchase. Always opt for a machine with higher hash power and efficiency. Usually, a machine with higher hash power is more costly. To keep a track of your expenditure and evaluate your returns, one could make use of the Bitcoin Mining Profit Calculator. AvalonMiner 741, AntMiner S9, AntMiner S7 are a few of the most popular, cost effective and reliable miners available on the market which can be easily bought from online shopping sites such as Amazon. In addition to this, one also needs to find a power supply compatible with their choice of miner.

 

Mining software and Mining Pool

A cryptocurrency miner would not mint out hard coins for you. You need to integrate it with a mining software to help you mine your digital currency. EasyMiner has a very user friendly graphical user interface (GUI) and can be used by almost everyone with little to no technical knowledge. It is very user intuitive. If one wishes to use a terminal based mining software, CGMiner and BFGMiner are two very good options.

Since mining requires a lot of energy, it is a costly process. It is always recommended to mine cryptocurrencies on a large scale. Not just this, undergoing the mining process individually, one needs to spend a lot of hours simply waiting for the block of transactions to pull through and then getting their virtual currency as a reward. To overcome this excess expenditure of time, services like mining pools are available. In a mining pool, all the participating members pool together their computing power to save time. Every time a transaction pulls through on the network, all participating members of the pool receive a reward. Of course, the fraction of reward received depends upon how much computing power one contributed in the shared network.

 

Obtain a Bitcoin wallet and start mining

Before one actually starts mining, one requires a place to hold their coins. Several web based wallets and mobile applications based wallets are available to choose from to secure your digital currency. Airbitz, Blockchain, Freewallet, Jaxx, My Celium Wallet, Coinbase, Circle, Blockchain, Strongcoin, Xapo are a few of the most widely used wallets. Miners can explore all these options and choose one that best fits their requirements. Once you have everything in place, follow simple instructions inside the users manual of your miner and start mining!

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Mt Gox: Final chance to claim, last 4 days

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Clients of the dead crypto exchange Mt. Gox must submit claims for caught funds by Oct. 22. Claim for your lost bitcoin within 4 days

Clients of the dead crypto exchange Mt. Gox must submit claims for caught funds by Oct. 22.

The exchange initially opened up the cases procedure in August, after an extended bankruptcy fight.

In June, candidates requesting their bitcoin back won a remarkable triumph, as the Japanese bankruptcy court regulating the procedures moved the case to one of civil rehabilitation, which means creditors could petition for their cryptocurrency property, as opposed to a fiat proportional dependent on cryptocurrency costs in 2014.

Bitcoin was worth under $600 at the time the exchange opted for non-payment, however, like this took off to around $20,000 in December 2017 and is about $6,552 at press time.

 

After the October due date goes, as set out in late June, Mt. Gox trustee Nobuaki Kobayashi will have a further three months to document an announcement of endorsement or dismissal.

While creditors can petition for bitcoin claims, they can’t yet guarantee continues from any of the bitcoin forks that happened since the funds were first solidified in 2014.

As per the announcement laying out the civil rehabilitation process:

 

“At this moment, we plan not to accept specific filing of cryptocurrencies other than bitcoins. Instead, we plan to deem bitcoin creditors who have filed a proof of claim for bitcoins have also filed a proof of claims for other cryptocurrencies proportionate to the number of bitcoins filed. We will post the further detailed information on this website.”

 

Both corporate and individual creditors have possessed the capacity to petition for cases starting a month ago.

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Latest: Bitcoin Mining Complete Analysis

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The bitter truth is that Bitcoin mining has a centralized business operation as few handfuls of Companies have taken over the Bitcoin mining industry.

Citing various possibilities of regaining decentralization in the Bitcoin mining industry.

Why do we need a Consensus?

Any particular system, for efficient functioning, must have a governance mechanism, in order to avoid exploitation of the resources. This can be related to the Cryptocurrencies, where for its smooth functioning the consensus algorithm is applied. The power of decision making is taken from an individual and distributed among the community itself, which is the inherent reason for the development of Crypto economy. Proof of Work, Proof of Stake, Delegated Proof of Stake, etc is some of the only algorithms applied. Specifically, the world’s most popular cryptocurrency, Bitcoin incorporates the Proof of Work algorithm which implies the bitcoin mining operations.   

 

Decrease in the block reward over time

Mining is very similar to the traditional Gold mining where the users utilize the computer resources in order to solve a particular puzzle generated by the algorithm. The algorithm is designed in such a way that, on solving a puzzle successfully, that particular node of the network receives something known as block reward, in the form of Bitcoins along with the total transaction fees of the transactions he or she verifies. Currently, the block reward is 12.5 Bitcoins and before that was 25 and 50 Bitcoins respectively. It is estimated that approximately, for every 4 years the block reward gets halved.

 

The dominance of Bitcoin mining pools of China

The bitter truth is that Bitcoin mining has a centralized business operation as few handfuls of Companies have taken over the Bitcoin mining industry through their extensive hardware pieces of equipment. Specifically, Bitcoin mining companies from China namely Bitmain, BTCC/BTC China, and discus fish/F2Pool. The algorithm is designed in such a way that if the number of nodes club together and solve a common problem, then the difficulty is not increased but if the same number of minors individually try to you solve it, then the difficulty of solving increases. Therefore, people in early day days preferred to join the mining pools rather than individual mining. As an uninvited consequence of which, has resulted in the centralization of the mining pools.

 

Individual mining from home is non-profitable

If you are thinking of setting up a Bitcoin mining facility at your home, then it would be an utter failure, as the returns from the operations would be negligible, compared to the expenditure for electricity and types of equipment. In fact, smaller mining pools have also been suffering greatly and a Swedish Bitcoin mining pool, KnCMiner had also filed for bankruptcy. Hence, joining major Bitcoin mining pools is only way out, but even that has its own consequence as it leads to centralization of the mining operations. In a nutshell, it is highly challenging for an individual to undertake the Bitcoin mining operations.

 

Environmental effects and cost of electricity due to Bitcoin mining

Bitcoin mining operations have become so rampant, that they are eating up electricity which can be utilized by an entire country for a year. As mining operations have skyrocketed, even the price of electricity in various countries have been increased, particularly in China as they dominate it. The electricity bill of China’s largest Bitcoin mining pool, Antminer (Bitmain) accounts for a staggering $39,000 per day. China accounts for almost two-thirds of the total computational power vested in the field of Bitcoin mining. As mining operations require lots of electricity and generate thermal energy, it has environmental hazards and creates an imbalance in nature.

 

Increased electricity costs

On citing the harmful effects of Bitcoin Mining, governments of various countries have taken a stance of regulating them. Therefore, as a precautionary measure, they have increased the prices of electricity in order to control the mining operations but this would indirectly affect the Crypto Economy, as the mining pools would be forced to reduce their operations which would indirectly have an adverse effect on the prices of Bitcoin as the transaction fees would be affected. The combined effect of all these consequences might also push the price of Bitcoin.

 

Nearly impossible to regain the sanity of Bitcoin Mining

Long story short, Bitcoin mining have slipped from the hands of people as major business corporations have dominated over the industry. Regaining back decentralization in Bitcoin Mining, as it used to be in the earlier days, is highly challenging and equally competitive.

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Fortnite using Cryptocurrency: ERC20, ERC721 and more, good or bad?

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Incorporation of ERC20 and ERC721 tokens by Fortnite would effectively enable the players around the world, to utilize the cryptocurrency realistically.

Estimating the probability of introduction of cryptocurrencies within Fortnite.

Cryptocurrencies have become an integral part of the gaming industry

Cryptocurrencies have been quite popular and are actively being incorporated in almost all the domain, which entails some or the other kind of financial asset. Interestingly, the cryptocurrencies are also a crucial part of the gaming community where they are utilized by the users, to buy or sell the commodities in the virtual world. Although developed to revolutionize the real world economy of the world, the cryptocurrencies don’t stay back, when it comes to their popularity amongst the gaming community. Even Satoshi Nakamoto wouldn’t have imagined the way cryptocurrencies are being incorporated these days, apart from the economic perspective.

 

It all started with the Ethereum network

Notably, with the discovery of the Ethereum Protocol, Vitalik Buterin opened tons of gates for the Developers, Gamers, Investors, Entrepreneurs, and various other people to utilize the blockchain based template and, specifically enable the developers to develop their custom cryptocurrency project based on the Ethereum blockchain. The ERC20 protocol is effectively being used by various Decentralised applications which were designed to trade the virtual assets with real monetary value.  

 

Some favorite games using Crypto tokens

Currently, there are a lot of games which incorporate the use of cryptocurrencies within them, and the users can play games to earn cryptocurrencies. Some of the most popular ones in the list are Ever Dragon, Crypto baseball, Cropbytes, etc. However, the trend got escalated when Cryptokitties became popular, as it had blocked the entire Ethereum network. Followed by which, all the strategy and game building genre of games incorporated cryptocurrencies especially the Ethereum’s ERC20 based protocol tokens.

 

The Ethereum community is concentrated towards developing their protocols

Ethereum was a pioneer in developing non-fungible tokens which are predominantly used by the gaming community. The network has even focused upon the development of advanced versions of ERC20 protocol and hence improved the ERC721 tokens. However, much lesser known ERC1155 protocol has also been developed by the Ethereum team. The fungible tokens in games like Cryptokitties are used to buy or sell various in-game assets.

 

Should Fortnite use cryptocurrencies?

Take one of the most popular games of the current generation, Fortnite for instance. With millions of players playing Fortnite at any point in time throughout the world, they always seem to be dealing with the in-game assets due to the way they are designed. Traditionally, the users need to utilize the in-game currency known as V bucks to purchase things. But there are practical problems of liquidity, fungibility, and ownership which persist in the game, which can effectively be solved by cryptocurrencies.

 

ERC20 & ERC721 Protocols

Incorporation of ERC20 and ERC721 tokens by Fortnite would effectively enable the players around the world, to utilize the cryptocurrency realistically. Currently, the business model of Epic Games, which owns Fortnite, is concentrated towards its profit, as it controls the scarcity of the costumes, skins, cosmetics, etc. in the game. The data analysts at Epic, observe the demand and supply of various commodities within the game and respectively change them.

 

Reasons point towards a downward probability of such initiatives

Therefore, the incorporation of ERC20 or ERC721 tokens, in Fortnite might take quite a lot of time as the business model of the company is at stake. Epic might even ban the users who use the in-game assets in the secondary market. There are also various reasons pointing towards the inefficiencies, by incorporating cryptocurrencies in Fortnite. First of all, the tokens are well suited for decentralized applications such as Cryptokitties, Decentraland, etc. and as Fortnite was not predominantly developed within this genre, it would be quite challenging, to incentivize the entire game with blockchain based currencies in the upcoming updates.

 

Future of cryptocurrencies if Fortnite considers it

But, if the developers are serious about introducing the Cryptos, within Fortnite, then it would invariably take the crypto community by storm, as the vast customer base from Fortnite, would also be made available for the Crypto world. The cryptocurrencies would gain access to a broader market of the audience through this initiative and are better for the democratization of the global economy towards a bright future.

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