How Does Bitcoin Mining Work? - Hobbies Smile

Mine Bitcoins on Cloud Servers

If you know how to setup NiceHash on Linux, you can get it going on any cloud hosting provider. I would like to emphasise that normal cloud hosting servers will not work for this as they have no graphics cards.
So you're better off using servers normally used for AI (artificial intelligence) or ML (machine learning) as both require GPU power.
Another thing is, with cloud hosting such as Google or AWS, they charge you for what you use. So if you aren't careful, you could get charged well over a thousand dollars every month as Google & AWS will provide more computing/gpu power when your server is close to maxing out.
This is done because nornally, people or companies that go with Google or AWS have the money to pay for it and usually never want their services to go down. If I ran a serivce on a pre-determined plan, like 30 GB ram, when it maxes out, server stops. When the server stops, my service stops which loses me money. With most cloud hosting companies, the servers will never stop and you can scale quite efficiently.
Lastly, mining bitcoins as a hobby or as a job on cloud servers isn't profitable at all. You will end up spending more money on cloud hosting than you get in bitcoins.
My advice? Don't try mining for bitcoins using NiceHash or anything on Google Cloud Platform using the free account which is breaching their Terns of Service. Create a few accounts with other hosting companies such as AWS, IBM, Oracle, Alibaba Cloud and use their free plans to test out mining bitcoins on cloud hosting. If you like it, use the free AWS EC2 instance you get (free forever with limited use) and mine away.
Or look for other alternative cloud hosting companies that are a lot cheaper but gives the same results. Or better yet get an ASIC miner. It requires a bigger initial investment, but it will pay for itself in the long run.
submitted by Sycrixx to NiceHash [link] [comments]

What will be your biggest fears and risks to setup mining farm.

What will be your biggest fears and risks to setup mining farm.
https://preview.redd.it/1mc2ilhunwf41.jpg?width=1280&format=pjpg&auto=webp&s=e573bcad9aa13b87ec1a691496268dd1303b70c3
Crypto currency mining is fascinating topic. It is 21st century mining with computer hardware and software. Looking for blocks on the block-chain to be rewarded in crypto currency. To start crypto currency mining business or hobby you have to understand what kind of risks you might face. To start Bitcoin mining you will need and ASIC miner, which is basically bunch of CPUs. This kind of equipment might cost you a lot of capital, so it is a good thing to recognize the risks you might face.
  1. In the early days in Bitcoin mining you could make some profit with your laptop CPU or GPU. These days are long gone, every year new more efficient hardware is been developed. Which makes older hardware obsolete for mining. Meaning that bad timing investment could potentially make your investment worthless.
  2. Hardware failure is very big thing to reduce mining risks. This hardware needs to be run 24/7 to gain the most optimal revenue from mining. Very often these devices/hardware do brake down, asic miners are the worse hardware comparing to GPU. Hashing board failure is common problem on them, which will need additional investment after 6 month from your purchase. If this would happen to your devices.
  3. The one of the hardest parts is not enough profits. Crypto currencies are extremely volatile, one day you could mine in profit the next day you might be at loss. If you are using latest hardware, most important to stay in the game and mine with profit. Is to have cheapest electric rate between all the other miners on network. Electric is everyone biggest OPEX cost, dont even think to start mining as a business large scale if your power costs is above 6-7c a kw/h. It might be profitable to mine with 20c per kw/h today but it might not be anymore tomorrow. Which means you will need to shutdown your mining farm.
  4. Legal risks . Crypto currency is still very new, and it has not been regulated very well. So you might face some kind of crypto currency ban in the country which might affect your mining operation.
  5. Hacking – Use crypto currency safe as possible. You know the good old saying not your keys not your coins. Don’t keep your mined coins on exchange. And use only community trusted mining pools.
  6. And the last of the top 6 is the environmental risk. Choose mining location wisely. Mining hardware most likely will use a lot of power, this is why they will produce a lot of heat. And heat will affect your mining operation. Something like mining container could be an option.
Recognize your risks before starting a mining operation.
Please comment down bellow with any more risks you might think it is worth to mention.
VIDEO - https://www.youtube.com/watch?v=-eNuG04n2zI&feature=youtu.be
submitted by mineshop to gpumining [link] [comments]

Halving importance: Miner perspective

The bitcoin halvings in 2012 and 2016 were at times when mining changed from a fun hobby to the beginning of farms and larger mining operations. We went from CPU-GPU-ASIC in these 2 halving periods. The main theme during most of this time was people mining for fun and at a relatively low cost, all while BTC was mainly under $1k.
Things changed when the antminer S7 and later S9 came out and BTC began to really rise in price. Miners were making a lot of real money and thus began the creation of major mining farms for profit.
When the element of mining as a business is the forefront of the network, selling BTC to cover costs becomes a big part of most operations. We have all heard the number of 1800 BTC created daily during the 12.5 block reward time, and this has translated to around 18,000,000 usd per day @ a $10k BTC price.
The reason this is so significant is miners are the only group of people that have brand new BTC that is constantly open sold on the market. Every other person involved in BTC is buying and selling existing BTC supply.
When the miner reward is cut to 6.25, this will help in the long run imo, but may add even more selling pressure by miners in the short term. Miners will instantly be making half the amount and will still have the same business costs. Even with rewards cut in half, 900 BTC and $9 million will be created per day as of right now. This is still a huge amount to be absorbed in the market, and we could see even more selling pressure than we do now where a lot of miners have a buffer in mining profits at the 1800 BTC per day network rate.
TDLR: Halving will help in the long run but short term could add even more selling pressure than right now at a higher BTC inflation.
submitted by tke1600 to Bitcoin [link] [comments]

Bitcoin Halving: How Miners are Preparing for Lower Block Rewards

As the latest Bitcoin halving approaches, miners are upgrading equipment, optimizing arrangements, conserving power and more in the race to dominate.
How are bitcoin (BTC) miners strategizing for the upcoming halving event, in which block reward subsidies will be cut by 50 percent?

On this week’s episode of “Bitcoin Halving 2020: Miner Perspectives,” Kristy-Leigh Minehan and Pavel Moravec give an in-depth explanation of what miners are doing to maximize profits and increase operational efficiency.

Since October, Minehan explains, bitcoin mining farms have been getting on “the upgrade train” and purchasing state-of-the-art ASIC machines such as the Antminer S17 and S19. Moravec says bitcoin miners have also been looking at creative ways to cut electricity costs by leveraging surplus energy from certain cities’ power grids.

What started primarily as a hobby in 2009 has flourished over the years, gained broader adoption and ultimately evolved into a new, professional industry.

“We’ve gotten to a point in bitcoin’s history where the government is paying attention and has started to realize bitcoin isn’t going away,” Minehan said. “Mining is not going away. And it’s in their best interest to start working with miners.”

Teaming up with local governments and utility providers is another miner strategy both Minehan and Moravec have seen on the increase in recent years. This is why Minehan believes even the geographic distribution of miners, which was discussed in depth in an earlier podcast episode, may further stretch the industry into North America and Europe. (China remains the dominant locale.)
Continue Reading On
https://www.coindesk.com/bitcoin-halving-podcast-episode-2
submitted by SaftNow_Coin to u/SaftNow_Coin [link] [comments]

Is mining reasonable in this market?

New to crypto. From what I’ve read in the past, Bitcoin mining was no longer profitable since the odds of getting a coin were roughly that of winning the lottery(?), and there was such a ridiculous amount of competition.
Is this still true?
I’ve recently made a small BTC purchase experimenting with the market, and curious if the above has changed at all.
Given a startup cost of ~2K for an asic miner and average US powebandwidth costs, is there a reasonable ROI at all? Interested as both a hobby and hopefully some kind of return.
Or do you think I’m better served just planting the same money in BTC and throwing it in a paper wallet for awhile?
Setting up a Lightning Node on an incoming raspberry pi sounds like fun, but that also sounds like not a for-profit project.
submitted by IsThereCheese to Bitcoin [link] [comments]

The Problem with PoW

The Problem with PoW
Miners have always had it rough..
"Frustrated Miners"

The Problem with PoW
(and what is being done to solve it)

Proof of Work (PoW) is one of the most commonly used consensus mechanisms entrusted to secure and validate many of today’s most successful cryptocurrencies, Bitcoin being one. Battle-hardened and having weathered the test of time, Bitcoin has demonstrated the undeniable strength and reliability of the PoW consensus model through sheer market saturation, and of course, its persistency.
In addition to the cost of powerful computing hardware, miners prove that they are benefiting the network by expending energy in the form of electricity, by solving and hashing away complex math problems on their computers, utilizing any suitable tools that they have at their disposal. The mathematics involved in securing proof of work revolve around unique algorithms, each with their own benefits and vulnerabilities, and can require different software/hardware to mine depending on the coin.
Because each block has a unique and entirely random hash, or “puzzle” to solve, the “work” has to be performed for each block individually and the difficulty of the problem can be increased as the speed at which blocks are solved increases.

Hashrates and Hardware Types

While proof of work is an effective means of securing a blockchain, it inherently promotes competition amongst miners seeking higher and higher hashrates due to the rewards earned by the node who wins the right to add the next block. In turn, these higher hash rates benefit the blockchain, providing better security when it’s a result of a well distributed/decentralized network of miners.
When Bitcoin first launched its genesis block, it was mined exclusively by CPUs. Over the years, various programmers and developers have devised newer, faster, and more energy efficient ways to generate higher hashrates; some by perfecting the software end of things, and others, when the incentives are great enough, create expensive specialized hardware such as ASICs (application-specific integrated circuit). With the express purpose of extracting every last bit of hashing power, efficiency being paramount, ASICs are stripped down, bare minimum, hardware representations of a specific coin’s algorithm.
This gives ASICS a massive advantage in terms of raw hashing power and also in terms of energy consumption against CPUs/GPUs, but with significant drawbacks of being very expensive to design/manufacture, translating to a high economic barrier for the casual miner. Due to the fact that they are virtual hardware representations of a single targeted algorithm, this means that if a project decides to fork and change algorithms suddenly, your powerful brand-new ASIC becomes a very expensive paperweight. The high costs in developing and manufacturing ASICs and the associated risks involved, make them unfit for mass adoption at this time.
Somewhere on the high end, in the vast hashrate expanse created between GPU and ASIC, sits the FPGA (field programmable gate array). FPGAs are basically ASICs that make some compromises with efficiency in order to have more flexibility, namely they are reprogrammable and often used in the “field” to test an algorithm before implementing it in an ASIC. As a precursor to the ASIC, FPGAs are somewhat similar to GPUs in their flexibility, but require advanced programming skills and, like ASICs, are expensive and still fairly uncommon.

2 Guys 1 ASIC

One of the issues with proof of work incentivizing the pursuit of higher hashrates is in how the network calculates block reward coinbase payouts and rewards miners based on the work that they have submitted. If a coin generated, say a block a minute, and this is a constant, then what happens if more miners jump on a network and do more work? The network cannot pay out more than 1 block reward per 1 minute, and so a difficulty mechanism is used to maintain balance. The difficulty will scale up and down in response to the overall nethash, so if many miners join the network, or extremely high hashing devices such as ASICs or FPGAs jump on, the network will respond accordingly, using the difficulty mechanism to make the problems harder, effectively giving an edge to hardware that can solve them faster, balancing the network. This not only maintains the block a minute reward but it has the added side-effect of energy requirements that scale up with network adoption.
Imagine, for example, if one miner gets on a network all alone with a CPU doing 50 MH/s and is getting all 100 coins that can possibly be paid out in a day. Then, if another miner jumps on the network with the same CPU, each miner would receive 50 coins in a day instead of 100 since they are splitting the required work evenly, despite the fact that the net electrical output has doubled along with the work. Electricity costs miner’s money and is a factor in driving up coin price along with adoption, and since more people are now mining, the coin is less centralized. Now let’s say a large corporation has found it profitable to manufacture an ASIC for this coin, knowing they will make their money back mining it or selling the units to professionals. They join the network doing 900 MH/s and will be pulling in 90 coins a day, while the two guys with their CPUs each get 5 now. Those two guys aren’t very happy, but the corporation is. Not only does this negatively affect the miners, it compromises the security of the entire network by centralizing the coin supply and hashrate, opening the doors to double spends and 51% attacks from potential malicious actors. Uncertainty of motives and questionable validity in a distributed ledger do not mix.
When technology advances in a field, it is usually applauded and welcomed with open arms, but in the world of crypto things can work quite differently. One of the glaring flaws in the current model and the advent of specialized hardware is that it’s never ending. Suppose the two men from the rather extreme example above took out a loan to get themselves that ASIC they heard about that can get them 90 coins a day? When they join the other ASIC on the network, the difficulty adjusts to keep daily payouts consistent at 100, and they will each receive only 33 coins instead of 90 since the reward is now being split three ways. Now what happens if a better ASIC is released by that corporation? Hopefully, those two guys were able to pay off their loans and sell their old ASICs before they became obsolete.
This system, as it stands now, only perpetuates a never ending hashrate arms race in which the weapons of choice are usually a combination of efficiency, economics, profitability and in some cases control.

Implications of Centralization

This brings us to another big concern with expensive specialized hardware: the risk of centralization. Because they are so expensive and inaccessible to the casual miner, ASICs and FPGAs predominantly remain limited to a select few. Centralization occurs when one small group or a single entity controls the vast majority hash power and, as a result, coin supply and is able to exert its influence to manipulate the market or in some cases, the network itself (usually the case of dishonest nodes or bad actors).
This is entirely antithetical of what cryptocurrency was born of, and since its inception many concerted efforts have been made to avoid centralization at all costs. An entity in control of a centralized coin would have the power to manipulate the price, and having a centralized hashrate would enable them to affect network usability, reliability, and even perform double spends leading to the demise of a coin, among other things.
The world of crypto is a strange new place, with rapidly growing advancements across many fields, economies, and boarders, leaving plenty of room for improvement; while it may feel like a never-ending game of catch up, there are many talented developers and programmers working around the clock to bring us all more sustainable solutions.

The Rise of FPGAs

With the recent implementation of the commonly used coding language C++, and due to their overall flexibility, FPGAs are becoming somewhat more common, especially in larger farms and in industrial setting; but they still remain primarily out of the hands of most mining enthusiasts and almost unheard of to the average hobby miner. Things appear to be changing though, one example of which I’ll discuss below, and it is thought by some, that soon we will see a day when mining with a CPU or GPU just won’t cut it any longer, and the market will be dominated by FPGAs and specialized ASICs, bringing with them efficiency gains for proof of work, while also carelessly leading us all towards the next round of spending.
A perfect real-world example of the effect specialized hardware has had on the crypto-community was recently discovered involving a fairly new project called VerusCoin and a fairly new, relatively more economically accessible FPGA. The FPGA is designed to target specific alt-coins whose algo’s do not require RAM overhead. It was discovered the company had released a new algorithm, kept secret from the public, which could effectively mine Verus at 20x the speed of GPUs, which were the next fastest hardware types mining on the Verus network.
Unfortunately this was done with a deliberately secret approach, calling the Verus algorithm “Algo1” and encouraging owners of the FPGA to never speak of the algorithm in public channels, admonishing a user when they did let the cat out of the bag. The problem with this business model is that it is parasitic in nature. In an ecosystem where advancements can benefit the entire crypto community, this sort of secret mining approach also does not support the philosophies set forth by the Bitcoin or subsequent open source and decentralization movements.
Although this was not done in the spirit of open source, it does hint to an important step in hardware innovation where we could see more efficient specialized systems within reach of the casual miner. The FPGA requires unique sets of data called a bitstream in order to be able to recognize each individual coin’s algorithm and mine them. Because it’s reprogrammable, with the support of a strong development team creating such bitstreams, the miner doesn’t end up with a brick if an algorithm changes.

All is not lost thanks to.. um.. Technology?

Shortly after discovering FPGAs on the network, the Verus developers quickly designed, tested, and implemented a new, much more complex and improved algorithm via a fork that enabled Verus to transition smoothly from VerusHash 1.0 to VerusHash 2.0 at block 310,000. Since the fork, VerusHash 2.0 has demonstrated doing exactly what it was designed for- equalizing hardware performance relative to the device being used while enabling CPUs (the most widely available “ASICs”) to mine side by side with GPUs, at a profit and it appears this will also apply to other specialized hardware. This is something no other project has been able to do until now. Rather than pursue the folly of so many other projects before it- attempting to be “ASIC proof”, Verus effectively achieved and presents to the world an entirely new model of “hardware homogeny”. As the late, great, Bruce Lee once said- “Don’t get set into one form, adapt it and build your own, and let it grow, be like water.”
In the design of VerusHash 2.0, Verus has shown it doesn’t resist progress like so many other new algorithms try to do, it embraces change and adapts to it in the way that water becomes whatever vessel it inhabits. This new approach- an industry first- could very well become an industry standard and in doing so, would usher in a new age for proof of work based coins. VerusHash 2.0 has the potential to correct the single largest design flaw in the proof of work consensus mechanism- the ever expanding monetary and energy requirements that have plagued PoW based projects since the inception of the consensus mechanism. Verus also solves another major issue of coin and net hash centralization by enabling legitimate CPU mining, offering greater coin and hashrate distribution.
Digging a bit deeper it turns out the Verus development team are no rookies. The lead developer Michael F Toutonghi has spent decades in the field programming and is a former Vice President and Technical Fellow at Microsoft, recognized founder and architect of Microsoft's .Net platform, ex-Technical Fellow of Microsoft's advertising platform, ex-CTO, Parallels Corporation, and an experienced distributed computing and machine learning architect. The project he helped create employs and makes use of a diverse myriad of technologies and security features to form one of the most advanced and secure cryptocurrency to date. A brief description of what makes VerusCoin special quoted from a community member-
"Verus has a unique and new consensus algorithm called Proof of Power which is a 50% PoW/50% PoS algorithm that solves theoretical weaknesses in other PoS systems (Nothing at Stake problem for example) and is provably immune to 51% hash attacks. With this, Verus uses the new hash algorithm, VerusHash 2.0. VerusHash 2.0 is designed to better equalize mining across all hardware platforms, while favoring the latest CPUs over older types, which is also one defense against the centralizing potential of botnets. Unlike past efforts to equalize hardware hash-rates across different hardware types, VerusHash 2.0 explicitly enables CPUs to gain even more power relative to GPUs and FPGAs, enabling the most decentralizing hardware, CPUs (due to their virtually complete market penetration), to stay relevant as miners for the indefinite future. As for anonymity, Verus is not a "forced private", allowing for both transparent and shielded (private) transactions...and private messages as well"

If other projects can learn from this and adopt a similar approach or continue to innovate with new ideas, it could mean an end to all the doom and gloom predictions that CPU and GPU mining are dead, offering a much needed reprieve and an alternative to miners who have been faced with the difficult decision of either pulling the plug and shutting down shop or breaking down their rigs to sell off parts and buy new, more expensive hardware…and in so doing present an overall unprecedented level of decentralization not yet seen in cryptocurrency.
Technological advancements led us to the world of secure digital currencies and the progress being made with hardware efficiencies is indisputably beneficial to us all. ASICs and FPGAs aren’t inherently bad, and there are ways in which they could be made more affordable and available for mass distribution. More than anything, it is important that we work together as communities to find solutions that can benefit us all for the long term.

In an ever changing world where it may be easy to lose sight of the real accomplishments that brought us to this point one thing is certain, cryptocurrency is here to stay and the projects that are doing something to solve the current problems in the proof of work consensus mechanism will be the ones that lead us toward our collective vision of a better world- not just for the world of crypto but for each and every one of us.
submitted by Godballz to CryptoCurrency [link] [comments]

Crypto Mining for Beginners. Is it really worth it?

Crypto Mining for Beginners. Is it really worth it?

Image from blokt.com
Mining cryptocoins is an arms race that rewards early adopters. You might have heard of Bitcoin, the first decentralized cryptocurrency that was released in early 2009. Similar digital currencies have crept into the worldwide market since then, including a spin-off from Bitcoin called Bitcoin Cash. You can get in on the cryptocurrency rush if you take the time to learn the basics properly.

Which Alt-Coins Should Be Mined?


Image from btcwarp.com
If you had started mining Bitcoins back in 2009, you could have earned thousands of dollars by now. At the same time, there are plenty of ways you could have lost money, too. Bitcoins are not a good choice for beginning miners who work on a small scale. The current up-front investment and maintenance costs, not to mention the sheer mathematical difficulty of the process, just doesn't make it profitable for consumer-level hardware. Now, Bitcoin mining is reserved for large-scale operations only.
Litecoins, Dogecoins, and Feathercoins, on the other hand, are three Scrypt-based cryptocurrencies that are the best cost-benefit for beginners.
Dogecoins and Feathercoins would yield slightly less profit with the same mining hardware but are becoming more popular daily. Peercoins, too, can also be a reasonably decent return on your investment of time and energy.
As more people join the cryptocoin rush, your choice could get more difficult to mine because more expensive hardware will be required to discover coins. You will be forced to either invest heavily if you want to stay mining that coin, or you will want to take your earnings and switch to an easier cryptocoin. Understanding the top 3 bitcoin mining methods is probably where you need to begin; this article focuses on mining "scrypt" coins.
Also, be sure you are in a country where bitcoins and bitcoin mining is legal.

Is It Worth It to Mine Cryptocoins?

As a hobby venture, yes, cryptocoin mining can generate a small income of perhaps a dollar or two per day. In particular, the digital currencies mentioned above are very accessible for regular people to mine, and a person can recoup $1000 in hardware costs in about 18-24 months.
As a second income, no, cryptocoin mining is not a reliable way to make substantial money for most people. The profit from mining cryptocoins only becomes significant when someone is willing to invest $3000-$5000 in up-front hardware costs, at which time you could potentially earn $50 per day or more.

Set Reosonable Expectations

If your objective is to earn substantial money as a second income, then you are better off purchasing cryptocoins with cash instead of mining them, and then tucking them away in the hopes that they will jump in value like gold or silver bullion. If your objective is to make a few digital bucks and spend them somehow, then you just might have a slow way to do that with mining.
Smart miners need to keep electricity costs to under $0.11 per kilowatt-hour; mining with 4 GPU video cards can net you around $8.00 to $10.00 per day (depending upon the cryptocurrency you choose), or around $250-$300 per month.
The two catches are:
1) The up-front investment in purchasing 4 ASIC processors or 4 AMD Radeon graphic processing units
2) The market value of cryptocoins
Now, there is a small chance that your chosen digital currency will jump in value alongside Bitcoin at some point. Then, possibly, you could find yourself sitting on thousands of dollars in cryptocoins. The emphasis here is on "small chance," with small meaning "slightly better than winning the lottery."
If you do decide to try cryptocoin mining, definitely do so as a hobby with a very small income return. Think of it as "gathering gold dust" instead of collecting actual gold nuggets. And always, always, do your research to avoid a scam currency.

How Cryptocoin Mining Works

Let's focus on mining scrypt coins, namely Litecoins, Dogecoins, or Feathercoins. The whole focus of mining is to accomplish three things:
- Provide bookkeeping services to the coin network. Mining is essentially 24/7 computer accounting called "verifying transactions."
- Get paid a small reward for your accounting services by receiving fractions of coins every couple of days.
- Keep your personal costs down, including electricity and hardware.

The Laundry List: What You Will Need to Mine Cryptocoins


https://preview.redd.it/gx65tcz0ncg31.jpg?width=1280&format=pjpg&auto=webp&s=f99b79d0ff96fe7d529dc20d52964b46306fb070
You will need ten things to mine Litecoins, Dogecoins, and/or Feathercoins.
1) A free private database called a coin wallet. This is a password-protected container that stores your earnings and keeps a network-wide ledger of transactions.
2) A free mining software package, like this one from AMD, typically made up of cgminer and stratum.
3) A membership in an online mining pool, which is a community of miners who combine their computers to increase profitability and income stability.
4) Membership at an online currency exchange, where you can exchange your virtual coins for conventional cash, and vice versa.
5) A reliable full-time internet connection, ideally 2 megabits per second or faster speed.
6) A hardware setup location in your basement or other cool and air-conditioned space.
7) A desktop or custom-built computer designed for mining. Yes, you may use your current computer to start, but you won't be able to use the computer while the miner is running. A separate dedicated computer is ideal. Do not use a laptop, gaming console or handheld device to mine. These devices just are not effective enough to generate income.
8) An ATI graphics processing unit (GPU) or a specialized processing device called a mining ASIC chip. The cost will be anywhere from $90 used to $3000 new for each GPU or ASIC chip. The GPU or ASIC will be the workhorse of providing the accounting services and mining work.
10) A house fan to blow cool air across your mining computer. Mining generates substantial heat, and cooling the hardware is critical for your success.
11) You absolutely need a strong appetite of personal curiosity for reading and constant learning, as there are ongoing technology changes and new techniques for optimizing coin mining results. The most successful coin miners spend hours every week studying the best ways to adjust and improve their coin mining performance.

Original Blog Post: https://www.lifewire.com/cryptocoin-mining-for-beginners-2483064
submitted by Tokenberry to NewbieZone [link] [comments]

Flashback Friday: When I though I was going to be rich :-)

I was going through my crypto archive and here a picture when time were not just better but unbelievably profitable for a hobby miner (and made me spend a bit too much money on hardware).

This was on 24 January 2018, and I was pulling 0,0026 BTC per day (back then it was 23ish EUR with the EUBTC rate) on 10 low-middle grade GPUs. This was without any kind of OC (I was going full blast, it was just so profitable, lol).
2 * rx570 + 8 Nvidia (3 * 1050ti + 5 1060 6Go).
Now I have 2 more GPUs, finely tuned OC, and I would get around 0,5mBTC/Day (below electricity cost in my region).
https://i.redd.it/ikgdsawsysk11.jpg
I guess when something is too good to be true, it's too good to be true. But I was drawn into it. I was always curious about Bitcoin when BTC was 200 euro but back then it wasn't profitable anyway already because of FPGA and ASIC and I wasn't really clear where to buy BTC that wouldn't scam me of my money. BTC went to 600 euro and I though things have peaked already so I was fuck it I'm too late for the party. I admit FOMO brought me in with the Bullrun end 2017.

Now, we are in september, back in DecembeJanuary I projected that I should BE my initial investment in July and start printing money by then. Right now, I'm something like <30% BE it and the value of my stack is still going down since I've HODL all of my BTC and never sold.

Nowadays, my rig is off because electricity is too expensive to make it run (Western Europe problem I know) so I can't even continue to progress to my BE even when electricity is cheaper at night. Tried mining ETH directly but the difficulty is ridiculous, the value took a nose dive, payout are unpredictably because of pool luck and pplns scheme, tried mining RVN but came late to the party pool luck and payement are even worse on RVN than on ETH.
- I would make more RVN mining ETH and buying RVN with ETH.
- I would also make more ETH mining on Nicehash and purchasing ETH with BTC.
But then, I would be trading so what's the point of mining.

I think I'll go deeper the rabbit hole and start mining speculative low diff coins if I can find a good project, but every project I hear from seems to already being past that point so I can't build a bag :-(

I'm happy I haven't got overboard with the spending and I'm glad I've learn many thing in this space along the way. So glad I didn't pull the trigger on a couple of Titan XP, I seriously considered it back when it was still profitable. But being in profit seems to be a concept that I'll probably never reach. So I'll guess "I'm in it for the tech" like so many people can say.

I guess this post will have the merit to warn potential adventurers to reconsider spending any amount of money they are not ready to be parted from.

If however you have "free electricity" I still wish you good luck because at a large scale you still won't BE the initial investment if you want to build today, and at a small scale, you won't make a buck anyway and just provide cheap hashrate to NH buyers.


submitted by Spykwak to NiceHash [link] [comments]

The Problem with PoW


Miners have always had it rough..
"Frustrated Miners"


The Problem with PoW
(and what is being done to solve it)

Proof of Work (PoW) is one of the most commonly used consensus mechanisms entrusted to secure and validate many of today’s most successful cryptocurrencies, Bitcoin being one. Battle-hardened and having weathered the test of time, Bitcoin has demonstrated the undeniable strength and reliability of the PoW consensus model through sheer market saturation, and of course, its persistency.
In addition to the cost of powerful computing hardware, miners prove that they are benefiting the network by expending energy in the form of electricity, by solving and hashing away complex math problems on their computers, utilizing any suitable tools that they have at their disposal. The mathematics involved in securing proof of work revolve around unique algorithms, each with their own benefits and vulnerabilities, and can require different software/hardware to mine depending on the coin.
Because each block has a unique and entirely random hash, or “puzzle” to solve, the “work” has to be performed for each block individually and the difficulty of the problem can be increased as the speed at which blocks are solved increases.
Hashrates and Hardware Types
While proof of work is an effective means of securing a blockchain, it inherently promotes competition amongst miners seeking higher and higher hashrates due to the rewards earned by the node who wins the right to add the next block. In turn, these higher hash rates benefit the blockchain, providing better security when it’s a result of a well distributed/decentralized network of miners.
When Bitcoin first launched its genesis block, it was mined exclusively by CPUs. Over the years, various programmers and developers have devised newer, faster, and more energy efficient ways to generate higher hashrates; some by perfecting the software end of things, and others, when the incentives are great enough, create expensive specialized hardware such as ASICs (application-specific integrated circuit). With the express purpose of extracting every last bit of hashing power, efficiency being paramount, ASICs are stripped down, bare minimum, hardware representations of a specific coin’s algorithm.
This gives ASICS a massive advantage in terms of raw hashing power and also in terms of energy consumption against CPUs/GPUs, but with significant drawbacks of being very expensive to design/manufacture, translating to a high economic barrier for the casual miner. Due to the fact that they are virtual hardware representations of a single targeted algorithm, this means that if a project decides to fork and change algorithms suddenly, your powerful brand-new ASIC becomes a very expensive paperweight. The high costs in developing and manufacturing ASICs and the associated risks involved, make them unfit for mass adoption at this time.
Somewhere on the high end, in the vast hashrate expanse created between GPU and ASIC, sits the FPGA (field programmable gate array). FPGAs are basically ASICs that make some compromises with efficiency in order to have more flexibility, namely they are reprogrammable and often used in the “field” to test an algorithm before implementing it in an ASIC. As a precursor to the ASIC, FPGAs are somewhat similar to GPUs in their flexibility, but require advanced programming skills and, like ASICs, are expensive and still fairly uncommon.
2 Guys 1 ASIC
One of the issues with proof of work incentivizing the pursuit of higher hashrates is in how the network calculates block reward coinbase payouts and rewards miners based on the work that they have submitted. If a coin generated, say a block a minute, and this is a constant, then what happens if more miners jump on a network and do more work? The network cannot pay out more than 1 block reward per 1 minute, and so a difficulty mechanism is used to maintain balance. The difficulty will scale up and down in response to the overall nethash, so if many miners join the network, or extremely high hashing devices such as ASICs or FPGAs jump on, the network will respond accordingly, using the difficulty mechanism to make the problems harder, effectively giving an edge to hardware that can solve them faster, balancing the network. This not only maintains the block a minute reward but it has the added side-effect of energy requirements that scale up with network adoption.
Imagine, for example, if one miner gets on a network all alone with a CPU doing 50 MH/s and is getting all 100 coins that can possibly be paid out in a day. Then, if another miner jumps on the network with the same CPU, each miner would receive 50 coins in a day instead of 100 since they are splitting the required work evenly, despite the fact that the net electrical output has doubled along with the work. Electricity costs miner’s money and is a factor in driving up coin price along with adoption, and since more people are now mining, the coin is less centralized. Now let’s say a large corporation has found it profitable to manufacture an ASIC for this coin, knowing they will make their money back mining it or selling the units to professionals. They join the network doing 900 MH/s and will be pulling in 90 coins a day, while the two guys with their CPUs each get 5 now. Those two guys aren’t very happy, but the corporation is. Not only does this negatively affect the miners, it compromises the security of the entire network by centralizing the coin supply and hashrate, opening the doors to double spends and 51% attacks from potential malicious actors. Uncertainty of motives and questionable validity in a distributed ledger do not mix.
When technology advances in a field, it is usually applauded and welcomed with open arms, but in the world of crypto things can work quite differently. One of the glaring flaws in the current model and the advent of specialized hardware is that it’s never ending. Suppose the two men from the rather extreme example above took out a loan to get themselves that ASIC they heard about that can get them 90 coins a day? When they join the other ASIC on the network, the difficulty adjusts to keep daily payouts consistent at 100, and they will each receive only 33 coins instead of 90 since the reward is now being split three ways. Now what happens if a better ASIC is released by that corporation? Hopefully, those two guys were able to pay off their loans and sell their old ASICs before they became obsolete.
This system, as it stands now, only perpetuates a never ending hashrate arms race in which the weapons of choice are usually a combination of efficiency, economics, profitability and in some cases control.
Implications of Centralization
This brings us to another big concern with expensive specialized hardware: the risk of centralization. Because they are so expensive and inaccessible to the casual miner, ASICs and FPGAs predominantly remain limited to a select few. Centralization occurs when one small group or a single entity controls the vast majority hash power and, as a result, coin supply and is able to exert its influence to manipulate the market or in some cases, the network itself (usually the case of dishonest nodes or bad actors).
This is entirely antithetical of what cryptocurrency was born of, and since its inception many concerted efforts have been made to avoid centralization at all costs. An entity in control of a centralized coin would have the power to manipulate the price, and having a centralized hashrate would enable them to affect network usability, reliability, and even perform double spends leading to the demise of a coin, among other things.
The world of crypto is a strange new place, with rapidly growing advancements across many fields, economies, and boarders, leaving plenty of room for improvement; while it may feel like a never-ending game of catch up, there are many talented developers and programmers working around the clock to bring us all more sustainable solutions.
The Rise of FPGAs
With the recent implementation of the commonly used coding language C++, and due to their overall flexibility, FPGAs are becoming somewhat more common, especially in larger farms and in industrial setting; but they still remain primarily out of the hands of most mining enthusiasts and almost unheard of to the average hobby miner. Things appear to be changing though, one example of which I’ll discuss below, and it is thought by some, that soon we will see a day when mining with a CPU or GPU just won’t cut it any longer, and the market will be dominated by FPGAs and specialized ASICs, bringing with them efficiency gains for proof of work, while also carelessly leading us all towards the next round of spending.
A perfect real-world example of the effect specialized hardware has had on the crypto-community was recently discovered involving a fairly new project called VerusCoin and a fairly new, relatively more economically accessible FPGA. The FPGA is designed to target specific alt-coins whose algo’s do not require RAM overhead. It was discovered the company had released a new algorithm, kept secret from the public, which could effectively mine Verus at 20x the speed of GPUs, which were the next fastest hardware types mining on the Verus network.
Unfortunately this was done with a deliberately secret approach, calling the Verus algorithm “Algo1” and encouraging owners of the FPGA to never speak of the algorithm in public channels, admonishing a user when they did let the cat out of the bag. The problem with this business model is that it is parasitic in nature. In an ecosystem where advancements can benefit the entire crypto community, this sort of secret mining approach also does not support the philosophies set forth by the Bitcoin or subsequent open source and decentralization movements.
Although this was not done in the spirit of open source, it does hint to an important step in hardware innovation where we could see more efficient specialized systems within reach of the casual miner. The FPGA requires unique sets of data called a bitstream in order to be able to recognize each individual coin’s algorithm and mine them. Because it’s reprogrammable, with the support of a strong development team creating such bitstreams, the miner doesn’t end up with a brick if an algorithm changes.
All is not lost thanks to.. um.. Technology?
Shortly after discovering FPGAs on the network, the Verus developers quickly designed, tested, and implemented a new, much more complex and improved algorithm via a fork that enabled Verus to transition smoothly from VerusHash 1.0 to VerusHash 2.0 at block 310,000. Since the fork, VerusHash 2.0 has demonstrated doing exactly what it was designed for- equalizing hardware performance relative to the device being used while enabling CPUs (the most widely available “ASICs”) to mine side by side with GPUs, at a profit and it appears this will also apply to other specialized hardware. This is something no other project has been able to do until now. Rather than pursue the folly of so many other projects before it- attempting to be “ASIC proof”, Verus effectively achieved and presents to the world an entirely new model of “hardware homogeny”. As the late, great, Bruce Lee once said- “Don’t get set into one form, adapt it and build your own, and let it grow, be like water.”
In the design of VerusHash 2.0, Verus has shown it doesn’t resist progress like so many other new algorithms try to do, it embraces change and adapts to it in the way that water becomes whatever vessel it inhabits. This new approach- an industry first- could very well become an industry standard and in doing so, would usher in a new age for proof of work based coins. VerusHash 2.0 has the potential to correct the single largest design flaw in the proof of work consensus mechanism- the ever expanding monetary and energy requirements that have plagued PoW based projects since the inception of the consensus mechanism. Verus also solves another major issue of coin and net hash centralization by enabling legitimate CPU mining, offering greater coin and hashrate distribution.
Digging a bit deeper it turns out the Verus development team are no rookies. The lead developer Michael F Toutonghi has spent decades in the field programming and is a former Vice President and Technical Fellow at Microsoft, recognized founder and architect of Microsoft's .Net platform, ex-Technical Fellow of Microsoft's advertising platform, ex-CTO, Parallels Corporation, and an experienced distributed computing and machine learning architect. The project he helped create employs and makes use of a diverse myriad of technologies and security features to form one of the most advanced and secure cryptocurrency to date. A brief description of what makes VerusCoin special quoted from a community member-
"Verus has a unique and new consensus algorithm called Proof of Power which is a 50% PoW/50% PoS algorithm that solves theoretical weaknesses in other PoS systems (Nothing at Stake problem for example) and is provably immune to 51% hash attacks. With this, Verus uses the new hash algorithm, VerusHash 2.0. VerusHash 2.0 is designed to better equalize mining across all hardware platforms, while favoring the latest CPUs over older types, which is also one defense against the centralizing potential of botnets. Unlike past efforts to equalize hardware hash-rates across different hardware types, VerusHash 2.0 explicitly enables CPUs to gain even more power relative to GPUs and FPGAs, enabling the most decentralizing hardware, CPUs (due to their virtually complete market penetration), to stay relevant as miners for the indefinite future. As for anonymity, Verus is not a "forced private", allowing for both transparent and shielded (private) transactions...and private messages as well"
If other projects can learn from this and adopt a similar approach or continue to innovate with new ideas, it could mean an end to all the doom and gloom predictions that CPU and GPU mining are dead, offering a much needed reprieve and an alternative to miners who have been faced with the difficult decision of either pulling the plug and shutting down shop or breaking down their rigs to sell off parts and buy new, more expensive hardware…and in so doing present an overall unprecedented level of decentralization not yet seen in cryptocurrency.
Technological advancements led us to the world of secure digital currencies and the progress being made with hardware efficiencies is indisputably beneficial to us all. ASICs and FPGAs aren’t inherently bad, and there are ways in which they could be made more affordable and available for mass distribution. More than anything, it is important that we work together as communities to find solutions that can benefit us all for the long term.
In an ever changing world where it may be easy to lose sight of the real accomplishments that brought us to this point one thing is certain, cryptocurrency is here to stay and the projects that are doing something to solve the current problems in the proof of work consensus mechanism will be the ones that lead us toward our collective vision of a better world- not just for the world of crypto but for each and every one of us.
submitted by Godballz to EtherMining [link] [comments]

The Problem with PoW

The Problem with PoW

Miners have always had it rough..
"Frustrated Miners"


The Problem with PoW
(and what is being done to solve it)

Proof of Work (PoW) is one of the most commonly used consensus mechanisms entrusted to secure and validate many of today’s most successful cryptocurrencies, Bitcoin being one. Battle-hardened and having weathered the test of time, Bitcoin has demonstrated the undeniable strength and reliability of the PoW consensus model through sheer market saturation, and of course, its persistency.
In addition to the cost of powerful computing hardware, miners prove that they are benefiting the network by expending energy in the form of electricity, by solving and hashing away complex math problems on their computers, utilizing any suitable tools that they have at their disposal. The mathematics involved in securing proof of work revolve around unique algorithms, each with their own benefits and vulnerabilities, and can require different software/hardware to mine depending on the coin.
Because each block has a unique and entirely random hash, or “puzzle” to solve, the “work” has to be performed for each block individually and the difficulty of the problem can be increased as the speed at which blocks are solved increases.
Hashrates and Hardware Types
While proof of work is an effective means of securing a blockchain, it inherently promotes competition amongst miners seeking higher and higher hashrates due to the rewards earned by the node who wins the right to add the next block. In turn, these higher hash rates benefit the blockchain, providing better security when it’s a result of a well distributed/decentralized network of miners.
When Bitcoin first launched its genesis block, it was mined exclusively by CPUs. Over the years, various programmers and developers have devised newer, faster, and more energy efficient ways to generate higher hashrates; some by perfecting the software end of things, and others, when the incentives are great enough, create expensive specialized hardware such as ASICs (application-specific integrated circuit). With the express purpose of extracting every last bit of hashing power, efficiency being paramount, ASICs are stripped down, bare minimum, hardware representations of a specific coin’s algorithm.
This gives ASICS a massive advantage in terms of raw hashing power and also in terms of energy consumption against CPUs/GPUs, but with significant drawbacks of being very expensive to design/manufacture, translating to a high economic barrier for the casual miner. Due to the fact that they are virtual hardware representations of a single targeted algorithm, this means that if a project decides to fork and change algorithms suddenly, your powerful brand-new ASIC becomes a very expensive paperweight. The high costs in developing and manufacturing ASICs and the associated risks involved, make them unfit for mass adoption at this time.
Somewhere on the high end, in the vast hashrate expanse created between GPU and ASIC, sits the FPGA (field programmable gate array). FPGAs are basically ASICs that make some compromises with efficiency in order to have more flexibility, namely they are reprogrammable and often used in the “field” to test an algorithm before implementing it in an ASIC. As a precursor to the ASIC, FPGAs are somewhat similar to GPUs in their flexibility, but require advanced programming skills and, like ASICs, are expensive and still fairly uncommon.
2 Guys 1 ASIC
One of the issues with proof of work incentivizing the pursuit of higher hashrates is in how the network calculates block reward coinbase payouts and rewards miners based on the work that they have submitted. If a coin generated, say a block a minute, and this is a constant, then what happens if more miners jump on a network and do more work? The network cannot pay out more than 1 block reward per 1 minute, and so a difficulty mechanism is used to maintain balance. The difficulty will scale up and down in response to the overall nethash, so if many miners join the network, or extremely high hashing devices such as ASICs or FPGAs jump on, the network will respond accordingly, using the difficulty mechanism to make the problems harder, effectively giving an edge to hardware that can solve them faster, balancing the network. This not only maintains the block a minute reward but it has the added side-effect of energy requirements that scale up with network adoption.
Imagine, for example, if one miner gets on a network all alone with a CPU doing 50 MH/s and is getting all 100 coins that can possibly be paid out in a day. Then, if another miner jumps on the network with the same CPU, each miner would receive 50 coins in a day instead of 100 since they are splitting the required work evenly, despite the fact that the net electrical output has doubled along with the work. Electricity costs miner’s money and is a factor in driving up coin price along with adoption, and since more people are now mining, the coin is less centralized. Now let’s say a large corporation has found it profitable to manufacture an ASIC for this coin, knowing they will make their money back mining it or selling the units to professionals. They join the network doing 900 MH/s and will be pulling in 90 coins a day, while the two guys with their CPUs each get 5 now. Those two guys aren’t very happy, but the corporation is. Not only does this negatively affect the miners, it compromises the security of the entire network by centralizing the coin supply and hashrate, opening the doors to double spends and 51% attacks from potential malicious actors. Uncertainty of motives and questionable validity in a distributed ledger do not mix.
When technology advances in a field, it is usually applauded and welcomed with open arms, but in the world of crypto things can work quite differently. One of the glaring flaws in the current model and the advent of specialized hardware is that it’s never ending. Suppose the two men from the rather extreme example above took out a loan to get themselves that ASIC they heard about that can get them 90 coins a day? When they join the other ASIC on the network, the difficulty adjusts to keep daily payouts consistent at 100, and they will each receive only 33 coins instead of 90 since the reward is now being split three ways. Now what happens if a better ASIC is released by that corporation? Hopefully, those two guys were able to pay off their loans and sell their old ASICs before they became obsolete.
This system, as it stands now, only perpetuates a never ending hashrate arms race in which the weapons of choice are usually a combination of efficiency, economics, profitability and in some cases control.
Implications of Centralization
This brings us to another big concern with expensive specialized hardware: the risk of centralization. Because they are so expensive and inaccessible to the casual miner, ASICs and FPGAs predominantly remain limited to a select few. Centralization occurs when one small group or a single entity controls the vast majority hash power and, as a result, coin supply and is able to exert its influence to manipulate the market or in some cases, the network itself (usually the case of dishonest nodes or bad actors).
This is entirely antithetical of what cryptocurrency was born of, and since its inception many concerted efforts have been made to avoid centralization at all costs. An entity in control of a centralized coin would have the power to manipulate the price, and having a centralized hashrate would enable them to affect network usability, reliability, and even perform double spends leading to the demise of a coin, among other things.
The world of crypto is a strange new place, with rapidly growing advancements across many fields, economies, and boarders, leaving plenty of room for improvement; while it may feel like a never-ending game of catch up, there are many talented developers and programmers working around the clock to bring us all more sustainable solutions.
The Rise of FPGAs
With the recent implementation of the commonly used coding language C++, and due to their overall flexibility, FPGAs are becoming somewhat more common, especially in larger farms and in industrial setting; but they still remain primarily out of the hands of most mining enthusiasts and almost unheard of to the average hobby miner. Things appear to be changing though, one example of which I’ll discuss below, and it is thought by some, that soon we will see a day when mining with a CPU or GPU just won’t cut it any longer, and the market will be dominated by FPGAs and specialized ASICs, bringing with them efficiency gains for proof of work, while also carelessly leading us all towards the next round of spending.
A perfect real-world example of the effect specialized hardware has had on the crypto-community was recently discovered involving a fairly new project called VerusCoin and a fairly new, relatively more economically accessible FPGA. The FPGA is designed to target specific alt-coins whose algo’s do not require RAM overhead. It was discovered the company had released a new algorithm, kept secret from the public, which could effectively mine Verus at 20x the speed of GPUs, which were the next fastest hardware types mining on the Verus network.
Unfortunately this was done with a deliberately secret approach, calling the Verus algorithm “Algo1” and encouraging owners of the FPGA to never speak of the algorithm in public channels, admonishing a user when they did let the cat out of the bag. The problem with this business model is that it is parasitic in nature. In an ecosystem where advancements can benefit the entire crypto community, this sort of secret mining approach also does not support the philosophies set forth by the Bitcoin or subsequent open source and decentralization movements.
Although this was not done in the spirit of open source, it does hint to an important step in hardware innovation where we could see more efficient specialized systems within reach of the casual miner. The FPGA requires unique sets of data called a bitstream in order to be able to recognize each individual coin’s algorithm and mine them. Because it’s reprogrammable, with the support of a strong development team creating such bitstreams, the miner doesn’t end up with a brick if an algorithm changes.
All is not lost thanks to.. um.. Technology?
Shortly after discovering FPGAs on the network, the Verus developers quickly designed, tested, and implemented a new, much more complex and improved algorithm via a fork that enabled Verus to transition smoothly from VerusHash 1.0 to VerusHash 2.0 at block 310,000. Since the fork, VerusHash 2.0 has demonstrated doing exactly what it was designed for- equalizing hardware performance relative to the device being used while enabling CPUs (the most widely available “ASICs”) to mine side by side with GPUs, at a profit and it appears this will also apply to other specialized hardware. This is something no other project has been able to do until now. Rather than pursue the folly of so many other projects before it- attempting to be “ASIC proof”, Verus effectively achieved and presents to the world an entirely new model of “hardware homogeny”. As the late, great, Bruce Lee once said- “Don’t get set into one form, adapt it and build your own, and let it grow, be like water.”
In the design of VerusHash 2.0, Verus has shown it doesn’t resist progress like so many other new algorithms try to do, it embraces change and adapts to it in the way that water becomes whatever vessel it inhabits. This new approach- an industry first- could very well become an industry standard and in doing so, would usher in a new age for proof of work based coins. VerusHash 2.0 has the potential to correct the single largest design flaw in the proof of work consensus mechanism- the ever expanding monetary and energy requirements that have plagued PoW based projects since the inception of the consensus mechanism. Verus also solves another major issue of coin and net hash centralization by enabling legitimate CPU mining, offering greater coin and hashrate distribution.
Digging a bit deeper it turns out the Verus development team are no rookies. The lead developer Michael F Toutonghi has spent decades in the field programming and is a former Vice President and Technical Fellow at Microsoft, recognized founder and architect of Microsoft's .Net platform, ex-Technical Fellow of Microsoft's advertising platform, ex-CTO, Parallels Corporation, and an experienced distributed computing and machine learning architect. The project he helped create employs and makes use of a diverse myriad of technologies and security features to form one of the most advanced and secure cryptocurrency to date. A brief description of what makes VerusCoin special quoted from a community member-
"Verus has a unique and new consensus algorithm called Proof of Power which is a 50% PoW/50% PoS algorithm that solves theoretical weaknesses in other PoS systems (Nothing at Stake problem for example) and is provably immune to 51% hash attacks. With this, Verus uses the new hash algorithm, VerusHash 2.0. VerusHash 2.0 is designed to better equalize mining across all hardware platforms, while favoring the latest CPUs over older types, which is also one defense against the centralizing potential of botnets. Unlike past efforts to equalize hardware hash-rates across different hardware types, VerusHash 2.0 explicitly enables CPUs to gain even more power relative to GPUs and FPGAs, enabling the most decentralizing hardware, CPUs (due to their virtually complete market penetration), to stay relevant as miners for the indefinite future. As for anonymity, Verus is not a "forced private", allowing for both transparent and shielded (private) transactions...and private messages as well"
If other projects can learn from this and adopt a similar approach or continue to innovate with new ideas, it could mean an end to all the doom and gloom predictions that CPU and GPU mining are dead, offering a much needed reprieve and an alternative to miners who have been faced with the difficult decision of either pulling the plug and shutting down shop or breaking down their rigs to sell off parts and buy new, more expensive hardware…and in so doing present an overall unprecedented level of decentralization not yet seen in cryptocurrency.
Technological advancements led us to the world of secure digital currencies and the progress being made with hardware efficiencies is indisputably beneficial to us all. ASICs and FPGAs aren’t inherently bad, and there are ways in which they could be made more affordable and available for mass distribution. More than anything, it is important that we work together as communities to find solutions that can benefit us all for the long term.
In an ever changing world where it may be easy to lose sight of the real accomplishments that brought us to this point one thing is certain, cryptocurrency is here to stay and the projects that are doing something to solve the current problems in the proof of work consensus mechanism will be the ones that lead us toward our collective vision of a better world- not just for the world of crypto but for each and every one of us.
submitted by Godballz to gpumining [link] [comments]

The Problem with PoW

"Frustrated Miners"

The Problem with PoW
(and what is being done to solve it)

Proof of Work (PoW) is one of the most commonly used consensus mechanisms entrusted to secure and validate many of today’s most successful cryptocurrencies, Bitcoin being one. Battle-hardened and having weathered the test of time, Bitcoin has demonstrated the undeniable strength and reliability of the PoW consensus model through sheer market saturation, and of course, its persistency.
In addition to the cost of powerful computing hardware, miners prove that they are benefiting the network by expending energy in the form of electricity, by solving and hashing away complex math problems on their computers, utilizing any suitable tools that they have at their disposal. The mathematics involved in securing proof of work revolve around unique algorithms, each with their own benefits and vulnerabilities, and can require different software/hardware to mine depending on the coin.
Because each block has a unique and entirely random hash, or “puzzle” to solve, the “work” has to be performed for each block individually and the difficulty of the problem can be increased as the speed at which blocks are solved increases.

Hashrates and Hardware Types

While proof of work is an effective means of securing a blockchain, it inherently promotes competition amongst miners seeking higher and higher hashrates due to the rewards earned by the node who wins the right to add the next block. In turn, these higher hash rates benefit the blockchain, providing better security when it’s a result of a well distributed/decentralized network of miners.
When Bitcoin first launched its genesis block, it was mined exclusively by CPUs. Over the years, various programmers and developers have devised newer, faster, and more energy efficient ways to generate higher hashrates; some by perfecting the software end of things, and others, when the incentives are great enough, create expensive specialized hardware such as ASICs (application-specific integrated circuit). With the express purpose of extracting every last bit of hashing power, efficiency being paramount, ASICs are stripped down, bare minimum, hardware representations of a specific coin’s algorithm.
This gives ASICS a massive advantage in terms of raw hashing power and also in terms of energy consumption against CPUs/GPUs, but with significant drawbacks of being very expensive to design/manufacture, translating to a high economic barrier for the casual miner. Due to the fact that they are virtual hardware representations of a single targeted algorithm, this means that if a project decides to fork and change algorithms suddenly, your powerful brand-new ASIC becomes a very expensive paperweight. The high costs in developing and manufacturing ASICs and the associated risks involved, make them unfit for mass adoption at this time.
Somewhere on the high end, in the vast hashrate expanse created between GPU and ASIC, sits the FPGA (field programmable gate array). FPGAs are basically ASICs that make some compromises with efficiency in order to have more flexibility, namely they are reprogrammable and often used in the “field” to test an algorithm before implementing it in an ASIC. As a precursor to the ASIC, FPGAs are somewhat similar to GPUs in their flexibility, but require advanced programming skills and, like ASICs, are expensive and still fairly uncommon.

2 Guys 1 ASIC

One of the issues with proof of work incentivizing the pursuit of higher hashrates is in how the network calculates block reward coinbase payouts and rewards miners based on the work that they have submitted. If a coin generated, say a block a minute, and this is a constant, then what happens if more miners jump on a network and do more work? The network cannot pay out more than 1 block reward per 1 minute, and so a difficulty mechanism is used to maintain balance. The difficulty will scale up and down in response to the overall nethash, so if many miners join the network, or extremely high hashing devices such as ASICs or FPGAs jump on, the network will respond accordingly, using the difficulty mechanism to make the problems harder, effectively giving an edge to hardware that can solve them faster, balancing the network. This not only maintains the block a minute reward but it has the added side-effect of energy requirements that scale up with network adoption.
Imagine, for example, if one miner gets on a network all alone with a CPU doing 50 MH/s and is getting all 100 coins that can possibly be paid out in a day. Then, if another miner jumps on the network with the same CPU, each miner would receive 50 coins in a day instead of 100 since they are splitting the required work evenly, despite the fact that the net electrical output has doubled along with the work. Electricity costs miner’s money and is a factor in driving up coin price along with adoption, and since more people are now mining, the coin is less centralized. Now let’s say a large corporation has found it profitable to manufacture an ASIC for this coin, knowing they will make their money back mining it or selling the units to professionals. They join the network doing 900 MH/s and will be pulling in 90 coins a day, while the two guys with their CPUs each get 5 now. Those two guys aren’t very happy, but the corporation is. Not only does this negatively affect the miners, it compromises the security of the entire network by centralizing the coin supply and hashrate, opening the doors to double spends and 51% attacks from potential malicious actors. Uncertainty of motives and questionable validity in a distributed ledger do not mix.
When technology advances in a field, it is usually applauded and welcomed with open arms, but in the world of crypto things can work quite differently. One of the glaring flaws in the current model and the advent of specialized hardware is that it’s never ending. Suppose the two men from the rather extreme example above took out a loan to get themselves that ASIC they heard about that can get them 90 coins a day? When they join the other ASIC on the network, the difficulty adjusts to keep daily payouts consistent at 100, and they will each receive only 33 coins instead of 90 since the reward is now being split three ways. Now what happens if a better ASIC is released by that corporation? Hopefully, those two guys were able to pay off their loans and sell their old ASICs before they became obsolete.
This system, as it stands now, only perpetuates a never ending hashrate arms race in which the weapons of choice are usually a combination of efficiency, economics, profitability and in some cases control.

Implications of Centralization

This brings us to another big concern with expensive specialized hardware: the risk of centralization. Because they are so expensive and inaccessible to the casual miner, ASICs and FPGAs predominantly remain limited to a select few. Centralization occurs when one small group or a single entity controls the vast majority hash power and, as a result, coin supply and is able to exert its influence to manipulate the market or in some cases, the network itself (usually the case of dishonest nodes or bad actors).
This is entirely antithetical of what cryptocurrency was born of, and since its inception many concerted efforts have been made to avoid centralization at all costs. An entity in control of a centralized coin would have the power to manipulate the price, and having a centralized hashrate would enable them to affect network usability, reliability, and even perform double spends leading to the demise of a coin, among other things.
The world of crypto is a strange new place, with rapidly growing advancements across many fields, economies, and boarders, leaving plenty of room for improvement; while it may feel like a never-ending game of catch up, there are many talented developers and programmers working around the clock to bring us all more sustainable solutions.

The Rise of FPGAs

With the recent implementation of the commonly used coding language C++, and due to their overall flexibility, FPGAs are becoming somewhat more common, especially in larger farms and in industrial setting; but they still remain primarily out of the hands of most mining enthusiasts and almost unheard of to the average hobby miner. Things appear to be changing though, one example of which I’ll discuss below, and it is thought by some, that soon we will see a day when mining with a CPU or GPU just won’t cut it any longer, and the market will be dominated by FPGAs and specialized ASICs, bringing with them efficiency gains for proof of work, while also carelessly leading us all towards the next round of spending.
A perfect real-world example of the effect specialized hardware has had on the crypto-community was recently discovered involving a fairly new project called Verus Coin (https://veruscoin.io/) and a fairly new, relatively more economically accessible FPGA. The FPGA is designed to target specific alt-coins whose algo’s do not require RAM overhead. It was discovered the company had released a new algorithm, kept secret from the public, which could effectively mine Verus at 20x the speed of GPUs, which were the next fastest hardware types mining on the Verus network.
Unfortunately this was done with a deliberately secret approach, calling the Verus algorithm “Algo1” and encouraging owners of the FPGA to never speak of the algorithm in public channels, admonishing a user when they did let the cat out of the bag. The problem with this business model is that it is parasitic in nature. In an ecosystem where advancements can benefit the entire crypto community, this sort of secret mining approach also does not support the philosophies set forth by the Bitcoin or subsequent open source and decentralization movements.
Although this was not done in the spirit of open source, it does hint to an important step in hardware innovation where we could see more efficient specialized systems within reach of the casual miner. The FPGA requires unique sets of data called a bitstream in order to be able to recognize each individual coin’s algorithm and mine them. Because it’s reprogrammable, with the support of a strong development team creating such bitstreams, the miner doesn’t end up with a brick if an algorithm changes.

All is not lost thanks to.. um.. Technology?

Shortly after discovering FPGAs on the network, the Verus developers quickly designed, tested, and implemented a new, much more complex and improved algorithm via a fork that enabled Verus to transition smoothly from VerusHash 1.0 to VerusHash 2.0 at block 310,000. Since the fork, VerusHash 2.0 has demonstrated doing exactly what it was designed for- equalizing hardware performance relative to the device being used while enabling CPUs (the most widely available “ASICs”) to mine side by side with GPUs, at a profit and it appears this will also apply to other specialized hardware. This is something no other project has been able to do until now. Rather than pursue the folly of so many other projects before it- attempting to be “ASIC proof”, Verus effectively achieved and presents to the world an entirely new model of “hardware homogeny”. As the late, great, Bruce Lee once said- “Don’t get set into one form, adapt it and build your own, and let it grow, be like water.”
In the design of VerusHash 2.0, Verus has shown it doesn’t resist progress like so many other new algorithms try to do, it embraces change and adapts to it in the way that water becomes whatever vessel it inhabits. This new approach- an industry first- could very well become an industry standard and in doing so, would usher in a new age for proof of work based coins. VerusHash 2.0 has the potential to correct the single largest design flaw in the proof of work consensus mechanism- the ever expanding monetary and energy requirements that have plagued PoW based projects since the inception of the consensus mechanism. Verus also solves another major issue of coin and net hash centralization by enabling legitimate CPU mining, offering greater coin and hashrate distribution.
Digging a bit deeper it turns out the Verus development team are no rookies. The lead developer Michael F Toutonghi has spent decades in the field programming and is a former Vice President and Technical Fellow at Microsoft, recognized founder and architect of Microsoft's .Net platform, ex-Technical Fellow of Microsoft's advertising platform, ex-CTO, Parallels Corporation, and an experienced distributed computing and machine learning architect. The project he helped create employs and makes use of a diverse myriad of technologies and security features to form one of the most advanced and secure cryptocurrency to date. A brief description of what makes VerusCoin special quoted from a community member-
"Verus has a unique and new consensus algorithm called Proof of Power which is a 50% PoW/50% PoS algorithm that solves theoretical weaknesses in other PoS systems (Nothing at Stake problem for example) and is provably immune to 51% hash attacks. With this, Verus uses the new hash algorithm, VerusHash 2.0. VerusHash 2.0 is designed to better equalize mining across all hardware platforms, while favoring the latest CPUs over older types, which is also one defense against the centralizing potential of botnets. Unlike past efforts to equalize hardware hash-rates across different hardware types, VerusHash 2.0 explicitly enables CPUs to gain even more power relative to GPUs and FPGAs, enabling the most decentralizing hardware, CPUs (due to their virtually complete market penetration), to stay relevant as miners for the indefinite future. As for anonymity, Verus is not a "forced private", allowing for both transparent and shielded (private) transactions...and private messages as well"

If other projects can learn from this and adopt a similar approach or continue to innovate with new ideas, it could mean an end to all the doom and gloom predictions that CPU and GPU mining are dead, offering a much needed reprieve and an alternative to miners who have been faced with the difficult decision of either pulling the plug and shutting down shop or breaking down their rigs to sell off parts and buy new, more expensive hardware…and in so doing present an overall unprecedented level of decentralization not yet seen in cryptocurrency.
Technological advancements led us to the world of secure digital currencies and the progress being made with hardware efficiencies is indisputably beneficial to us all. ASICs and FPGAs aren’t inherently bad, and there are ways in which they could be made more affordable and available for mass distribution. More than anything, it is important that we work together as communities to find solutions that can benefit us all for the long term.

In an ever changing world where it may be easy to lose sight of the real accomplishments that brought us to this point one thing is certain, cryptocurrency is here to stay and the projects that are doing something to solve the current problems in the proof of work consensus mechanism will be the ones that lead us toward our collective vision of a better world- not just for the world of crypto but for each and every one of us.
submitted by Godballz to CryptoTechnology [link] [comments]

The rise of specialized hardware (particularly FPGAs) and its impact on the mining community

The rise of specialized hardware (particularly FPGAs) and its impact on the mining community

Proof of Work (PoW) is one of the most commonly used consensus mechanisms entrusted to secure and validate many of today’s most successful cryptocurrencies, Bitcoin being one. Battle-hardened and having weathered the test of time, Bitcoin has demonstrated the undeniable strength and reliability of the PoW consensus model through sheer market saturation, and of course, its persistency.

In addition to the cost of powerful computing hardware, miners prove that they are benefiting the network by expending energy in the form of electricity, by solving and hashing away complex math problems on their computers, utilizing any suitable tools that they have at their disposal. The mathematics involved in securing proof of work revolve around unique algorithms, each with their own benefits and vulnerabilities, and can require different software/hardware to mine depending on the coin.

Because each block has a unique and entirely random hash, or “puzzle” to solve, the “work” has to be performed for each block individually and the difficulty of the problem can be increased as the speed at which blocks are solved increases.

Hashrates and Hardware Types
While proof of work is an effective means of securing a blockchain, it inherently promotes competition amongst miners seeking higher and higher hashrates due to the rewards earned by the node who wins the right to add the next block. In turn, these higher hash rates benefit the blockchain, providing better security when it’s a result of a well distributed/decentralized network of miners.

When Bitcoin first launched its genesis block, it was mined exclusively by CPUs. Over the years, various programmers and developers have devised newer, faster, and more energy efficient ways to generate higher hashrates; some by perfecting the software end of things, and others, when the incentives are great enough, create expensive specialized hardware such as ASICs (application-specific integrated circuit). With the express purpose of extracting every last bit of hashing power, efficiency being paramount, ASICs are stripped down, bare minimum, hardware representations of a specific coin’s algorithm.

This gives ASICS a massive advantage in terms of raw hashing power and also in terms of energy consumption against CPUs/GPUs, but with significant drawbacks of being very expensive to design/manufacture, translating to a high economic barrier for the casual miner. Due to the fact that they are virtual hardware representations of a single targeted algorithm, this means that if a project decides to fork and change algorithms suddenly, your powerful brand-new ASIC becomes a very expensive paperweight. The high costs in developing and manufacturing ASICs and the associated risks involved, make them unfit for mass adoption at this time.

Somewhere on the high end, in the vast hashrate expanse created between GPU and ASIC, sits the FPGA (field programmable gate array). FPGAs are basically ASICs that make some compromises with efficiency in order to have more flexibility, namely they are reprogrammable and often used in the “field” to test an algorithm before implementing it in an ASIC. As a precursor to the ASIC, FPGAs are somewhat similar to GPUs in their flexibility, but require advanced programming skills and, like ASICs, are expensive and still fairly uncommon.

The Arms Race of the Geek
One of the issues with proof of work incentivizing the pursuit of higher hashrates is in how the network calculates block reward coinbase payouts and rewards miners based on the work that they have submitted. If a coin generated, say a block a minute, and this is a constant, then what happens if more miners jump on a network and do more work? The network cannot pay out more than 1 block reward per 1 minute, and so a difficulty mechanism is used to maintain balance. The difficulty will scale up and down in response to the overall nethash, so if many miners join the network, or extremely high hashing devices such as ASICs or FPGAs jump on, the network will respond accordingly, using the difficulty mechanism to make the problems harder, effectively giving an edge to hardware that can solve them faster, balancing the network. This not only maintains the block a minute reward but it has the added side-effect of energy requirements that scale up with network adoption.

Imagine, for example, if one miner gets on a network all alone with a CPU doing 50 MH/s and is getting all 100 coins that can possibly be paid out in a day. Then, if another miner jumps on the network with the same CPU, each miner would receive 50 coins in a day instead of 100 since they are splitting the required work evenly, despite the fact that the net electrical output has doubled along with the work. Electricity costs miner’s money and is a factor in driving up coin price along with adoption, and since more people are now mining, the coin is less centralized. Now let’s say a large corporation has found it profitable to manufacture an ASIC for this coin, knowing they will make their money back mining it or selling the units to professionals. They join the network doing 900 MH/s and will be pulling in 90 coins a day, while the two guys with their CPUs each get 5 now. Those two guys aren’t very happy, but the corporation is. Not only does this negatively affect the miners, it compromises the security of the entire network by centralizing the coin supply and hashrate, opening the doors to double spends and 51% attacks from potential malicious actors. Uncertainty of motives and questionable validity in a distributed ledger do not mix.

When technology advances in a field, it is usually applauded and welcomed with open arms, but in the world of crypto things can work quite differently. One of the glaring flaws in the current model and the advent of specialized hardware is that it’s never ending. Suppose the two men from the rather extreme example above took out a loan to get themselves that ASIC they heard about that can get them 90 coins a day? When they join the other ASIC on the network, the difficulty adjusts to keep daily payouts consistent at 100, and they will each receive only 33 coins instead of 90 since the reward is now being split three ways. Now what happens if a better ASIC is released by that corporation? Hopefully, those two guys were able to pay off their loans and sell their old ASICs before they became obsolete.

This system, as it stands now, only perpetuates a never ending hashrate arms race in which the weapons of choice are usually a combination of efficiency, economics, profitability and in some cases control.

Implications of Centralization
This brings us to another big concern with expensive specialized hardware: the risk of centralization. Because they are so expensive and inaccessible to the casual miner, ASICs and FPGAs predominantly remain limited to a select few. Centralization occurs when one small group or a single entity controls the vast majority hash power and, as a result, coin supply and is able to exert its influence to manipulate the market or in some cases, the network itself (usually the case of dishonest nodes or bad actors).

This is entirely antithetical of what cryptocurrency was born of, and since its inception many concerted efforts have been made to avoid centralization at all costs. An entity in control of a centralized coin would have the power to manipulate the price, and having a centralized hashrate would enable them to affect network usability, reliability, and even perform double spends leading to the demise of a coin, among other things.

The world of crypto is a strange new place, with rapidly growing advancements across many fields, economies, and boarders, leaving plenty of room for improvement; while it may feel like a never-ending game of catch up, there are many talented developers and programmers working around the clock to bring us all more sustainable solutions.

The Rise of FPGAs
With the recent implementation of the commonly used coding language C++, and due to their overall flexibility, FPGAs are becoming somewhat more common, especially in larger farms and in industrial setting; but they still remain primarily out of the hands of most mining enthusiasts and almost unheard of to the average hobby miner. Things appear to be changing though, one example of which I’ll discuss below, and it is thought by some, that soon we will see a day when mining with a CPU or GPU just won’t cut it any longer, and the market will be dominated by FPGAs and specialized ASICs, bringing with them efficiency gains for proof of work, while also carelessly leading us all towards the next round of spending.

A real-world example of the effect specialized hardware has had on the crypto-community was recently discovered involving a fairly new project called Verus Coin (https://veruscoin.io/) and a fairly new, relatively more economically accessible FPGA. The FPGA is designed to target specific alt-coins whose algo’s do not require RAM overhead. It was discovered the company had released a new algorithm, kept secret from the public, which could effectively mine Verus at 20x the speed of GPUs, which were the next fastest hardware types mining on the Verus network.

Unfortunately this was done with a deliberately secret approach, calling the Verus algorithm “Algo1” and encouraging owners of the FPGA to never speak of the algorithm in public channels, admonishing a user when they did let the cat out of the bag. The problem with this business model is that it is parasitic in nature. In an ecosystem where advancements can benefit the entire crypto community, this sort of secret mining approach also does not support the philosophies set forth by the Bitcoin or subsequent open source and decentralization movements.

Although this was not done in the spirit of open source, it does hint to an important step in hardware innovation where we could see more efficient specialized systems within reach of the casual miner. The FPGA requires unique sets of data called a bitstream in order to be able to recognize each individual coin’s algorithm and mine them. Because it’s reprogrammable, with the support of a strong development team creating such bitstreams, the miner doesn’t end up with a brick if an algorithm changes.

Inclusive Hardware Equalization, Security, Decentralization
Shortly after discovering FPGAs on the network, the Verus developers quickly designed, tested, and implemented a new, much more complex and improved algorithm via a fork that enabled Verus to transition smoothly from VerusHash 1.0 to VerusHash 2.0 at block 310,000. Since the fork, VerusHash 2.0 has demonstrated doing exactly what it was designed for- equalizing hardware performance relative to the device being used while enabling CPUs (the most widely available “ASICs”) to mine side by side with GPUs, at a profit and it appears this will also apply to other specialized hardware. This is something no other project has been able to do until now. Rather than pursue the folly of so many other projects before it- attempting to be “ASIC proof”, Verus effectively achieved and presents to the world an entirely new model of “hardware homogeny”. As the late, great, Bruce Lee once said- “Don’t get set into one form, adapt it and build your own, and let it grow, be like water.”

In the design of VerusHash 2.0, Verus has shown it doesn’t resist progress like so many other new algorithms try to do, it embraces change and adapts to it in the way that water becomes whatever vessel it inhabits. This new approach- an industry first- could very well become an industry standard and in doing so, would usher in a new age for proof of work based coins. VerusHash 2.0 has the potential to correct the single largest design flaw in the proof of work consensus mechanism- the ever expanding monetary and energy requirements that have plagued PoW based projects since the inception of the consensus mechanism. Verus also solves another major issue of coin and net hash centralization by enabling legitimate CPU mining, offering greater coin and hashrate distribution.

If other projects adopt Verus’ new algorithm- VerusHash 2.0, it could mean an end to all the doom and gloom predictions that CPU and GPU mining are dead, offering a much needed reprieve and an alternative to miners who have been faced with the difficult decision of either pulling the plug and shutting down shop or breaking down their rigs to sell off parts and buy new, more expensive hardware…and in so doing presents an overall unprecedented level of decentralization not seen in cryptocurrency.

Technological advancements led us to the world of secure digital currencies and the progress being made with hardware efficiencies is indisputably beneficial to us all. ASICs and FPGAs aren’t inherently bad, and there are ways in which they could be made more affordable and available for mass distribution. More than anything, it is important that we work together as communities to find solutions that can benefit us all for the long term.

In an ever changing world where it may be easy to lose sight of the real accomplishments that brought us to this point one thing is certain, VerusHash 2.0 is a shining beacon of hope and a lasting testament to the project’s unwavering dedication to it’s vision of a better world- not just for the world of crypto but for each and every one of us.
submitted by Godballz to CryptoTechnology [link] [comments]

To Vitalik and other ETH Devs, GPU Miners need you and you need GPU Miners (PoW/ProgPoW)

This is directed towards u/nickjohnson, u/vbuterin, u/5chdn and other ETH Devs.

Edit: Proof of ProgPoW: https://gangnam.wattpool.net/#/account/0x445c466856266f8a609f87fdc6b0aaeb274d203f
Initial testing is seeing 8.8-10.15mh/s on RX480 and 3.8-4mh/s on RX460. Will include write-up soon, Newest ETH-Miner release!

Let me start this by saying, I mined my first BTC before it was even $100 or well known. BTC Mined. That was my first foray into the PoW mining scene. I had a lot a fun doing so. I enjoy building computers, testing equipment, fixing problems. It's literally my everyday job as an IT Hardware Analyst for a company.

I had to put down my mining on GPU dreams due to ASICs overtaking the networks of both BTC and LTC. I gave up on crypto as a hobby. Why bother? I don't want an ASIC in my house. There's no fun in tuning an ASIC, cannot change out components, upgrade it, etc. Then in 2017 I heard a whisper of GPU mineable coin that was ASIC resistant. It was called Ethereum. It was posed to be the next "Apple" with great innovations. At first I was beset by previous failures of GPU mineable coins getting overtaken by ASICs. Eventually with some discussion to my friend we built our first GPU mining rig in June of 2017. I got into Ethereum by mining it.

Now ASICs run rampant through most of the top 100 Cryptocurrencies. The current outlook, regardless of the bear-market pricing, looks bleak. I want to appeal to Vitalik, Nick, and the other Ethereum developers. It was GPU miners you had in mind when you created the Ethereum network and not ASICs. Vitalik made the best effort of a ASIC-Resistant algorithm. It latest for years but it's a cat and mouse game. Continued development of ASIC-Resistant algorithms needs to continue, not fall by the wayside. u/AndLan u/ohgodagirl, Mr If, and others have poured non-paid work into ProgPoW and getting it working on the Ethereum network because they want to see Ethereum succeed.

ASICs are now on the network, ProgPoW is a solution, and we need YOU DEVELOPERS, To stand with US, THE MINERS! Together lets push Ethereum forward to #1!

The Developers and GPU Miners need a symbiotic relationship. GPU Miners are NOT against you! You should not be against us! We need to stand together to make Ethereum strong and succeed, not become Bitcoin, which as even in Ethereum's whitepaper you understood it became fairly centralized.
However, this mining algorithm is vulnerable to two forms of centralization. First, the mining ecosystem has come to be dominated by ASICs (application-specific integrated circuits), computer chips designed for, and therefore thousands of times more efficient at, the specific task of Bitcoin mining. This means that Bitcoin mining is no longer a highly decentralized and egalitarian pursuit, requiring millions of dollars of capital to effectively participate in.

In regards to Centralization Mr If, made an excellent argument last Dev meeting, for ProgPoW which I shall reiterate/paraphrase here for everyone on Reddit.

PoW is geared towards industries of scale. This is why ASICs typically become the dominate force, because the ASIC manufactures have the capital, investment, and industry to produce them at a low cost. Thus they reap the PoW rewards. Hence why all PoW tends to go towards ASIC. They can decide to sell ASIC and recoup cost plus profit or keep mining with that equipment. Making ASICs egalitarian. ASIC manufactures decide, not the miner communities, what they do with the ASICs. You pay to play and you must be first.
ProgPoW takes the same approach but changes who the industry is, instead of Bitmain/Innosilicon it is AMD/Nvidia. These two companies are industrial level manufactures and have the ability to produce on a scale to support PoW(Just look at all the overstock of Nvidia 1000 GPUs). In this sense we are trading one(ASICs) for another (ASIC-GPUs). We as PoW miners must use Nvidia/AMD GPUs to support the network. Because it is the commodity hardware mass available to everyone. ASICs ARE NOT commodity hardware and ARE NOT mass available to everyone. Changing from Eth-hash to ProgPoW changes the players in the game and chooses the lesser two evils (AMD/Nvidia).

ProgPoW is not stricitly an Algorithm to replace Eth-hash but a has various "buttons" and "knobs" to tune. hence why its called Programmable! Ill let an Eth-miner Dev explain it...
-Andrea LanFranchi (EthMiner Dev)
ProgPoW is not strictly an Algo, it is a finite set of basic operations. ProgPoW is to be considered more of a process which creates variants of the algo every specified interval. Due to this there is no concept of ProgPoW as an immutable algo like Eth-hash. It tune-able and can dial various "knobs" that allow the creation of large number "definition sets" which again due to the deterministic randomness create an infinite number of algo changes.
ProgPoW creates a new search kernel every 50 blocks. Every 50 . blocks the gpu receives a completely new and different kernel from the previous which causes hashrate to change. In ProgPoW there is no fixed and constant hashrate for GPUs. You have to take into account averages across multiple periods to get the best out of the hardware. Variances are from 8-9%.

I personally supported the Network at $400, $180, $1400 and still support it now $100. I supported throughout the uncertainty of the Iceage and delays. Ethereum is still a PoW coin! ONE OF THE BEST! It's what made ethereum great! The project has excellent idea's of smart contracts and Dapps. On top of all is a massive GPU networking supporting it. Throughout 2017 there were no ASICs(That we know of) yet the ethereum network grew. What helped make Ethereum blossom was the miners and the mining community.

I am personally invested into Ethereum want to see it succeed, I'm personally invested in PoW GPU mining, and want to see it succeed. I will invest my own time and money, being a GPU miner, into seeing that ProgPoW testnet gets fully scrutinized, put through it's paces to ensure that it is a fit for Ethereum and minimize problems. I plead, beg, and invite all other GPU miners to do so. If we want change we as miners must show through hashpower on the testnet, that we are pushing forward with ProgPoW. Throw a single GPU, a Rig, whatever you can spare or muster for ProgPoW testnet.

I can and am more than willing to help anyone setup the necessary files, miners, etc needed to get mining on the test network.
Right now you can download the ProgPoW Miner(Updates are constant) And Ethermine is in full support.
Ethminer -P stratum://(ProgPoW Test Address)[[email protected]](mailto:[email protected]):4444 -A progpow

Let's make a Decision together on ProgPoW. Miners are in majority support of ProgPoW and 100% support of kicking ASICs of the network(Look at Ethermine's twitter poll). GPU miners supported you, helped build your network, not investors, not ICOs. At the very heart of Ethereum beats the GPU. Operating that GPU is a typically an enthusiast, hobby miner, and a believer in Crypto.

*Edit:*PoW is the known best way to distribute token "fairly", yet everyone hates it and wants PoS? What happens when large ASIC manufacture and centralized parties mining with ASICs earn more tokens than anyone else? Wouldn't that lead to centralization in PoS? Ethereum is on PoW BECAUSE it needs it! And because Ethereum needs PoW, it needs GPU miners, and to stay decentralized to PoS and in PoS it needs to keep GPUs miners on board.

Vitalik, Nick, and others, a time-line needs to be set, ProgPoW needs to be in the Agenda continually, discussed throughly, until it's launched on the main network. I will personally come chat, debate ideas, with any of you! Civil discussions are important!







submitted by Xazax310 to ethereum [link] [comments]

Thinking of buying Bitmain Antminer S11 - any reviews and advice?

I enjoyed cryptomining with several GPU's when bitcoin was booming, but have since stopped because I use that hardware for other things. Bitcoin price is very low right now relative to the spike at the beginning of the year, so it seems like the price of asic miners are lowering. I found the Bitmain Antminer S11 which seems to be a good price for a hobby (around $500) and it seems to ride the line of being profitable right now at my electricity rates.
Does anyone have any experience or reviews with this machine? As a beginner in asic mining, is there anything I should know? I'm a tech savvy programmer who likes building hardware projects like 3d printers and drones - I think I will be able to handle the technical aspects of this project but I'm not as experienced in the crypto mining and asic space.
submitted by Mackelday to CryptoCurrency [link] [comments]

Achieving consensus in distributed systems – that chink in the armor hasn't gone away

First a disclosure: My name is Will, I founded Novauri, and our team is building a service that will allow users to buy and sell bitcoin in the US while keeping full control of their private keys as a mandatory design element, not an option.
Please SIGN UP for our US only closed beta test in 2015 here. It's super fast, takes 20 seconds, and we'll guarantee no transaction fees for the life of your account. Plus our rates will be highly competitive. Read all about it on the website!
I don’t like marketing, I intensely hate the spam I see on the forums, so my approach is going to be to write (semi) intelligent posts and hopefully gain customers through interaction and discourse, as opposed to spamming it up with astroturf and pictures of hipsters having fun that you could be like if you used our product. Now… my thoughts.
Proof of work – a tragedy of the commons
Not very long ago a mining pool called ghash.io reached 55% bitcoin mining power. It’s widely known that POW suffers from the tragedy of the commons. Mining is SHA256x2, which makes it really simple to build coin flipping application specific integrated circuits (ASICs) that run this faster than general purpose processors. This creates an economic incentive towards centralization where miners who can access the best ASICs first have a major advantage in hashing power per dollar.
Pools, a solution to a market demand that exacerbates the problem
A second problem is a solution to an economic demand, the existence of mining “pools”. Because a block is solved only every 10 minutes, as bitcoin scales, it becomes increasingly unlikely to ever solve a block by yourself, even with substantial processing power. Mining pools allow the “little guys” to participate too and contribute their hashing power to a pool of miners. This way they receive a portion of any block solved by the pool, enabling a steady and more consistent return on their investment in hardware, facilities and electricity.
Yet while pools solve a problem, they create a second issue, the centralization of mining power by pool operators. Because the blocks are “solved” by the managing pool directly, this gives the pool the same controls and ability to act poorly as if they had the hardware themselves.
One might argue that market forces will naturally correct things if a mining pool approaches 51%, but this has been disproven in practice with ghash.io. Selfish miners using ghash.io essentially put the entire system in dire peril by letting ghash.io reach 55%. They waited for others to “go first” before switching pools. This is the very definition of “tragedy of the commons”. I would argue it was only the price of bitcoin that changed the miners’ behavior, and reviewing the charts shows that the prices did not lead the mining power concentrations at all, which also defies common wisdom, but in reality is entirely true. P2P pool is a great idea, but it has not offered the same economic benefits to miners as other privately run pools on a balance sheet. Until it does, don't look there for a long term answer. Miners are trying to make a return, and if a pool gives them an advantage, most will use that pool over P2P. Mining is not a charity.
Proof of state – lack consensus and bring monopoly issues
Some might point to proof of stake as a potential solution (POS). Put very simply, POS is where by virtue of the fact that you own X virtual currency, you have a proportionate chance to win a vote or tiebreaker when confirming transactions.
Unfortunately, POS fails to provide a disincentive to fork and suffers from the monopoly problem. Ownership carries voting rights, and there is nothing wasted (no work) by voting for both sides of a fork. There is no consensus, so POS systems are generally hybrid models where POW is used to achieve consensus of forks regardless. POS also has a monopoly problem, which are as serious as POW’s problems. So solving bitcoin's problems with POS seems like a dead end. Very smart people have tried, and so far nothing viable has materialized that is stable enough to be trusted with something as mature and valuable as bitcoin.
So… let’s relist all of the bad news!!!
Solutions thus far are myopic, influenced by personal interests or blimp sized egos (I am one to talk), and are often more academic than pragmatic. Most are just to complicated to work or to be implemented safely without years of refinement in an alt coin.
Well, is there hope? What is the practical thing to do? Should we do nothing?
I would argue that there are three problems we must solve at once, and all three problems are very much interrelated. It’s one @[email protected]@ of a puzzle. We need to:
1) Make pooled mining uneconomical
2) Figure out a way to make small scale mining cost advantageous
3) Do 1 and 2 but allow normalized returns for little guys so they can run a small business or profitable hobby, without it being a lottery ticket.
Some say that a 51% issue would not be the end because we would know very quickly who the bad actor is and could react accordingly. I’m a little more concerned. A real shakeup in the core of bitcoin would shake confidence, and could set us back years. I feel we should as a community put a much higher priority on finding a practical, viable solution. Nothing academic, nothing incredibly complicated, but something that can shift the economics of the situation and solve the three problems listed above. While we have plenty of issues around individual usability, this is, in my humble opinion, the largest remaining vulnerability in bitcoin today.
So… what to do? How do we solve all three of these problems at once? What are the possible combinations of solutions that work? Let me take a stab at it…
1) Deterring pooled mining
Let’s give more serious consideration to two-phase mining.
The idea is to keep (SHA256(SHA256(header))) and add a requirement for (SHA256(SIG(header, privkey))), requiring the block to be signed with the private key of the miner. This kills pooled mining, dead. Miners can solve SHA256x2 but the pool needs the miner’s private key to sign the block header, which would allow the miner to steal the reward, which kills pools very fast.
2) Disincentivizing centralization of mining power
2a) Small scale heat recovery systems
We need to get people thinking about small scale heat recovery systems built around mining hardware. This will allow mining activity to serve as a source of heat in cold climates, or perform work where heat is required.
One example might be liquid submersion of the asic or heatsinks couples with a pump, radiator and fan in small, modular design might be economically viable. Electric heat is used very commonly, and when powered from clean power sources like solar, geothermal, nuclear (yes, nuclear I would count in the “clean” bucket) and wind, the net is a zero emission system that heats like an electric heater but adds security to the financial system in return, and generates profit for the beneficiary.
2b) Rotating or amorphous block hashing algorithms
Another possibility is to rotate or add complexity to the hash algorithms used to solve blocks. Instead of SHA256x2, perhaps SHA256x2 is rotated with scrypt? Perhaps there are many algorithms that rotate to add even more complixity. This would at a minimum make it much harder to design ASICs, and would institute a memory requirement as well. This would at least close the gap between specialized mining operations and home hobbyists. The problem is, what miner in their right mind would go with a hard fork in this direction? This is likely unviable because of economics.
2a is probably the way to go. Is there a 2c or d?
3) Normalizing returns
The issue here is that coinbase generation in a decentralized model is like winning the lottery. Your 2a heater would be unlikely to ever solve a block in it’s lifetime.
So this last issue is even harder to solve than 2. 3 is the reason mining pools were created in the first place. How do you increase reward frequency while lowering reward to generate a more predictable return?
Or maybe we are asking the wrong question or thinking in the wrong direction or dimension? Is there a way to centralize and normalize rewards in a safer way? Could the heater's price be subsidized by the mining activity if that activity was safely hard wired in the heater's hardware to pay block rewards to the reseller or manufacturer? Could electricity rates be offset by rewards going to electricity companies as a subsidy to completely smooth out the return on investment for a bitcoin heater?
That last one is tough and would need a really great strategy to reach a critical mass.
Does anyone smarter than me have an idea? This is really the problem. It’s three interrelated issues.
In closing, sign up for our closed US beta. There are still some spots left. We're poor but talented and our hearts are in the right place. Thank you!
submitted by MrMadden to Bitcoin [link] [comments]

PROJECT XPOWERMINER - MINING FROM ELECTRIC WIND TURBINES!

We would like to draw your attention to a rather promising project. There is no secret that a large number of people have got interested in the process of crypto-currency mining. The crypto-currency rate is constantly growing, so the investments in this kind of currency is in great demand. We would like to use this innovation establishing an XPS token, which is a smart contract based on the electronic platform ETHEREUM and allows every member of our project to maximize his/her benefits. We are crypto-enthusiasts and we began mining crypto-currency more than two years ago. At first it was a kind of a hobby, but later we noticed that the rate of currency was rapidly growing and our hobby turned into a rather profitable way of making money. First we mined crypto-currency using our personal computers. Then we replaced PCs with videocards and this measure brought much more money. The next step of our already high-income business was a purchase of ASIC-miners as they were the most convenient mining equipment. Mining income on ASIC-miners appeared to be much higher as compared to the same on videocards. However, 15% - 30% of net profit (which depended on the chosen mining way and the kind of mining coin) was paid for electricity. Taking into consideration the large mining output, it was a large sum of money. For example, mining $10 000 000 per month we had to pay $1 500 000 – $3 000 000 for electricity. As you can see it was high costs. After we realized it had been a rather unprofitable thing, we came up with the idea of how to reduce our expenses. To realize our project we have already bought a piece of land for building an autonomous mining centre. Constant winds in this area and wind turbines will provide the centre with the needed energy to function properly.
Issued XPS tokens will finance the purchase of ASIC – miners at prices of manufacturer, the purchase of wind turbines and proper functioning of the mining centre. Let us look at calculations: -a price for a 60 kw wind turbines is $60 000; -an ASIC-miner L3+ consumes 0.85 kw/h. So one windmill supplies 70 ASIC-miners with energy. -50 wind turbines provide 3500 ASIC-miners L3+ with continued work. -Total return in this case will be $1 670 000 per month. If we get power from a power station, we will pay for electricity $330 000 per month, which is 20% of net profit. In case of using wind turbines the expected savings exceed $4 000 000 per year. It means that purchase of wind turbines at $3 000 000 will amortize investments made in the project less than for 10 months. The profit from mining will be spent on the XPS-tokens. It will provide continuous rise in the cost of a token itself.Our XPS-token is something new as it differs from most other new coins. Our XPS tokens are based on the actual material assets such as ASIC-miners and mined crypto-currency, constantly growing in price. As you know, crypto-currency costs real money.
The profit from mining will be distributed in the following way: -50% will be used for buying of tokens; -30% will be used for purchasing of ASIC-miners and windmills; -20% will be spent both for the centre’s costs and expenses and as founders’ income.
We propose every member of our project to be a part of a profitable business according to the following plan: 
1.Entering contracts with the leading global Chinese producers of mining equipment. 2.Purchasing of mining equipment at manufacturer’s prices. 3.Purchasing and installing of wind turbines. 4.Mining the crypto-currency. 5.Entering largest stock exchanges and selling tokens in order to increase income. 6.Developing and establishing our own brand mining equipment with a low rate of energy consumption. 7.Producing our brand mining equipment. 8.Selling our brand equipment for XPS tokens. Taking into consideration all information above, we can conclude that the XPS- tokens will be more stable than other tokens as the price for the last ones is regulated mostly by speculative ways, which are based on the rumors about development of virtual items, but most of these items could hardly be ever developed. Our XPS tokens are backed by actual material assets, true mining and cost real money. Today there is a small percent of people who hasn’t heard about digital currencies and bitcoins. Large investors, national Governments and common people, who have already met the technology based on the Blockchain technology, realize its prospects. Fortunately, this idea has not been developed thoroughly yet, so those, who will develop it first, are the first to have a great opportunity to get better dividends. In October 2009 the first BTC exchange rate was set up on American stock exchange “New Liberty Standard”: 1.309.03 BTC cost $1 only. In the second half of 2017 1 BTC cost $5 000 already. So the first investors got more than 7 000 000% of income for 8 years. It is supposed that in 5-10 years the price of crypto-currency will grow on 20 000% – 30 000% – 50 000%. So, its mining will be in great demand for many years. To make money you do not need neither to buy expensive equipment nor worry about its safe storage. You also needn’t mine yourself. We will do it for you! Any person having 0,5 ETH or more can invest into our project and be sure of a good income. All the stages of purchase, delivery and sale will be available on our website with online support 24 hours a day 7 days a week. On pre-ICO the maximum sum of money is 20000 ETH. 300 XPS token costs 1 ETH. The general amount of tokens is 50 000 000 XPS. Pre-ICO provides only 6 000 000 XPS. 2 000 000 XPS out of 6 000 000 XPS will be first investors’ bonuses. It's not sold out tokens XPS will be destroyed. More information about our project can be found here: https://bitcointalk.org/index.php?topic=2426649.0 https://bitcointalk.org/index.php?topic=2472029.new#new http://bitcoingarden.org/forum/index.php?topic=22196.new#new http://bitcoingarden.org/forum/index.php?topic=22274.new#new http://bitcoingarden.org/forum/index.php?topic=22999.new#new
submitted by Xpowerminer to u/Xpowerminer [link] [comments]

I have a question about difficulty in the far future

I've read about people being worried about the upcoming halving, that miners will turn off their old ASICs and that blocks would be mined slower. I concluded that this won't be a big problem this halving because difficulty will readjust just fine, even if it takes over 2 weeks.
But what about 40 years in the future, or in 2140, when ALL bitcoins are mined. Unless a bitcoin is worth millions (so that transaction fees are worth something), how could that still be profitable for miners to maintain the network hashrate after certain halvings between 2060 and 2140?
And what about 51% attacks, if most miners quit mining, except a few hobby miners, simply because transaction fees are not profitable enough. A small group of people could cheaply buy enough high tech ASICs (or whatever hashing machines they have invented by then) and get over 51% easily. Will this be prevented by a hardfork? Will we wait and see what we'll do? Or is this a non-issue?
submitted by LiLBoner to Bitcoin [link] [comments]

What is the amateur friendly way to get into mining?

I want to do some mining, as a hobby, with no focus on profitability, but learning about computers and crypto will be a reward in itself.
Right now, I have an old laptop I have mining at a very low rate, which is fun but I want to get a little more serious.
It seems I have a few options. I could assemble a mining rig with multiple GPUs, while keeping the budget around 1000 bucks (lil more probably). I worry about the cost of this approach, but it would also yield the most experience.
The other options seem to be buying specific mining hardware like an ASIC miner (seems very expensive) or I saw USB miners like the mooonlander2 which seemed good for a hobbyist (like myself) but they are too plug & play, so I would learn less.
Yall have any suggestions? I know this is a very pricey time for components, and I also dont wanna spend money and have my miner become obsolete too quickly. I've been lurking and reading the sidebars of various mining subreddits, but I'm still struggling to decide on an approach.
I don't much care about which coins I mine. Probably not bitcoin, since that seems too hard for the hobbyist. (though perhaps Im mistaken)
submitted by 1337natetheLOLking to gpumining [link] [comments]

#ETN242 My story with ETN

ETN, or Electroneum, is for me something amazing.
As a small miner, for the first time, I had the ability to mine a whole coin in a reasonable time! I started with just my laptop, which only worked with two Cpu cores. In one day, I could be the owner of four coins! For me, this was an amazing moment, to get my first coin in december. I was very happy to participate in a project like this. In a short time, I found same minded people like you, in this subreddit. I saw that people were motivated and not only invested their money in this project but also their abilities and hobbies. Heck, I even saw muggs or replicacoins being made. I put my money together with my brother to buy a better graphics card and a better motherboard with a high-end cpu to mine ETN coins and to support the network.
Right now, I cannot help the network with my hashrates as my system is easily outperformed by ASIC-miners but now I see that the ETN-project profits from this circumstance and helps to persuade other miners to join this project.
The fact that this coin is the only one which is mineable with a smartphone is certainly a huge advantage! Anyone can install an app and thus anyone can mine. This coin has (in my opinion) a real chance to get globaly mass-adopted (even more than now!) and this fills me with pride. Why pride? Because I was one of a few when this project started.
Thank you for reading.
#crypto #bitcoin #Electroneum #ETN242 #ETN
submitted by vinci_inc to Electroneum [link] [comments]

What cheap miner should I get?

So, I had messed around with Bitcoin a bit some years ago; the most recent transaction I have in my wallet is from the DailyBitcoins faucet, and the most recent I have from actual mining was when DeepBit was still a thing. Fast-forward to yesterday, when I learned about Bitcoin's recent peaking in value -- the less-than-$10 I had three years ago is now worth over $300.
Right now, I'm considering investing that into a mining ASIC, more for the sport and hobby than to try and turn a profit. However, I neither know what the whole frontier is like right now (other than how ASICs have been dominating), nor what hardware to actually get for mining.
Are there any good suggestions for ASIC miners from reputable, trustworthy companies that accept BTC? I'm mostly interested in something cheap but reliable -- the best value that 25mBTC or less could buy.
submitted by TruePikachu to BitcoinMining [link] [comments]

Choice of Entity: Legal Concerns Associated With Founding a Mining Business

Hey everyone, I just wrote something up about the nuances associated with forming a mining business in the United States. It's meant to help people comply with tax reporting requirements in the most business-owner friendly way possible. As always, please consult with your accountant and/or lawyer before acting on any of this information, it's meant to be used as a resource, not as legal advice. I'll be writing up more legal-related news like this in the future, if you'd like more info, let me know and I'll give you the URL of the website I'm working on (still in development but will eventually have lots and lots of useful info like this).
*Please keep in mind I am NOT a lawyer (I am in law school, but I have zero credentials as of yet). This should NOT be relied on as your exclusive source of legal information.
Without further ado:
-------------|Choice of Entity: Legal Concerns Associated With Founding A Mining Business|-----------
You're probably wondering, what is the most efficient way to structure a new mining business. While the facts do vary, in the most instances, the answer is as an S-Corporation. Odds are, you're either thinking about setting the business up as an LLC or an S-Corp. Although many think the tax consequences are the same because these are both pass through entities, this assumption is false.
S-Corporations are usually going to the be the most efficient tax vehicle for a new mining business. The reason for this is self-employment tax.
LLC co-venturers must pay self-employment tax, in addition to their normal individual rate tax, of approximately 17% if they provide a 'service.' Mining is a service!
-------------------------------------------|Why is Mining A 'Service'?|------------------------------------------
At first glance, mining may seem like a passive activity. All you do is plug in the miner and it runs in the background all by itself with little to no maintenance required. Where's the service?
The easiest way to conceptualize mining as a service is to think about the actual passive version of investing in whatever cryptocurrency one plans to mine. Truly passive cryptocurrency investing simply entails buying a cryptocurrency on an exchange and holding it with the hope of turning a profit. Unlike mining, passive cryptocurrency investing requires no specialized hardware, limited internet connectivity, and minimal power inputs (just the amount required to use your computer to access the internet to buy/sell the cryptocurrency).
Unlike investing in cryptocurrency, mining is a business like activity (although in certain instances, it may only constitute hobby income; see section 183 of the Internal Revenue Code and the associated Treasury regulations for more information) that utilizes high tech machinery to solve a variety of complex equations and hash functions. In exchange for solving these equations, miners are rewarded with blocks of cryptocurrency that function as rewards. The cryptocurrency network benefits from miners (unless using a pure Proof of Stake framework, but that is outside the scope of this article) because miners process network transactions in a way that helps secure network stability and security.
To hammer the point home, Bitcoin would collapse without miners. Think about the magnitude of that statement. Mining is an essential service for a multi-billion dollar asset class that benefits the national investing public AND the international investing public. Thus, mining is a service.
-------------------------------------|Why Does It Matter if Mining Is A Service?|-------------------------------
Knowing that mining is considered a 'service' is important when deciding what sort of limited liability entity to use when forming your client's mining business because it drastically affects their future tax liability.
------------------------------|Self-Employment Tax Implications of Operating a LLC|-------------------------
LLCs are generally seen as desirable entities for new businesses because of lax corporate governance requirements, extreme freedom of contract, and favorable pass-through tax treatment (unless the founder elects to 'check-the-box' to be taxed as a corporation on the appropriate documents). Additionally, single member LLCs are seen as disregards and have a special tax treatment that will be discussed further elsewhere. For the purposes of self-employment tax, however, single member LLCs (a/k/a disregards) are afflicted by the same malady as member managed LLCs and Manager Managed LLCs--self-employment tax!
Self-employment tax has an effective rate of roughly 17% (check these numbers). This tax is ADDED to the LLC member's pass-through tax liability on their tax returns.
The governing statute (for self-employment related taxes) is 26 U.S.C. § 1402(a) and the regulations can be found at 26 C.F.R. 1.1402(a)-1, 1.1492(a)-2, and 1.1492(a)-3.
This means that if a LLC co-venturer is in the highest tax bracket, they will be paying 37% in individual income tax on all earned income (whether or not distributed to members) PLUS 17% self-employment tax for an EFFECTIVE TAX RATE OF 54%!!!!!!!
Even if a shareholder is only in the 25% individual income-tax rate, they will still have an effective tax rate of 42%, way too high to justify!
Note that, at time of writing (and since 2015), the self-employment tax (when required to be paid) must be paid on the first $118,500 of "combined wages, tips, and net earnings;" note that the business will still be responsible for 2.9% Medicare tax on all self employment income (including all income about $118,500). [cites directly below].
See Self-Employment Tax (Social Security and Medicare Taxes), IRS, https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes (last accessed Jan. 21, 2018); see also Tony Nitti, S Corporation Shareholder Compensation: How Much Is Enough?, THE TAX ADVISOR (Aug. 1, 2011), https://www.thetaxadviser.com/issues/2011/aug/nitti-aug2011.html#fnref_6.
--------------------------|Self-Employment Tax Implications of Operating a S-Corporation|-----------------
Forming an S-Corporation instead of an LLC offers many tax benefits for potential mining businesses. For example, S-Corporations offer the same beneficial tax pass-through treatment as LLCs. S-Corporations also offer the ability to AVOID ANY SELF-EMPLOYMENT TAX WHATSOEVER (in theory)!!!!!!!
DISTRIBUTING INCOME
S-Corporations have three main ways of distributing income: (1) employee salaries and payments to other creditors; (2) expansion / improvement expenses; and (3) making distributions to shareholders.
EMPLOYMENT TAXES
It is generally disadvantageous to pay yourself a salary when running an S-Corp. because salaries come with concomitant payroll tax requirements (the payroll tax is in place of a self-employment tax). Generally, shareholders prefer receiving distributions because no payroll tax is imposed on such distributions. Furthermore, these distributions are often tax free events if the shareholder has a positive basis in the corporation in excess of the amount of money being distributed to the shareholder.
Rev. Rul. 59-221, 1959-1 C.B. 225 holds that a shareholder’s undistributed share of S corporation income is not treated as self-employment income.
BASIS
As a shareholder receives tax free distributions, their basis decreases dollar-for-dollar measured against tax-free received. Once a shareholders basis is zero, they will owe taxes on any additional income earned that year. Shareholders will pay long-term capital gain rates (in most instances) on distributions in excess of the shareholder's basis in the S-Corporation.
------------------------|SHAREHOLDERS PERFORMING SERVICES FOR THE CORPORATION|------------------ S-Corporation employee shareholders (i.e., a shareholder who also performs employee-like functions for the S-Corp) MUST be paid a "REASONABLE SALARY" for the performance of "SUBSTANTIAL SERVICES."
For years, there was very little guidance on the meaning of "reasonable salary" or "substantial services." Luckily, we now have a much better idea of what these terms mean. For a great overview of case law and administrative rulings governing these issues, check out this article (also cited above) entitled S Corporation Shareholder Compensation: How Much Is Enough? (written by a CPA, MST).
Essentially, within the context of a cryptocurrency mining business, your clients can avoid employment taxes (in most cases) because there is very little your clients will be doing that would qualify as substantial services. The term "substantial services" has been interpreted to require a fair amount of work (case law examples often talk about someone working for 35 hours a week, 52 weeks a year as constituting "substantial services"). Running a small to medium scale mining business is a fairly barebones operation.
---------------------------------|Fundamentals of Running a Mining Business|---------------------------------
STARTING UP
Most mining operations require only the following startup materials: (1) mining hardware; (2) internet connection; and (3) adequate power source. These are the minimum components required for a mining business. Medium to large scale mining operations will likely also require some sort of separate area (i.e., signing a commercial lease) to put the mining hardware as it can get quite loud with $50,000 or more of equipment running on a non-stop basis.
The mining business operator need only set up his mining hardware once and maybe troubleshoot occasionally or add/upgrade a machine. While setting up a miner can sometimes be a pain in the rear, it seldom takes more than a couple hours (keep in mind, this estimate is for businesses using commercial ASIC miners; people building their own miners warrant special considerations due to extreme time commitments required for such build-outs).
PRINCIPAL FUNCTIONS
As the principal function of the business is to solve transactions with complex hashing functions only solvable with specific computerized technology, the other duties associated with running a mining business are largely administrative, can be easily automated, and require only minimal supervision and monitoring. These other duties include: (1) sending mined coins from the mining pool to their wallet; (2) recording the value of a mined coin at the time it is mined (or transferred from the mining pool to the miner's business wallet if done on a consistent incremental basis); (3) keeping accurate financial records; (4) paying overhead costs; (5) occasionally logging into mining pool or miner IP address to ensure miner is running properly; (6) occasionally research new equipment for future purchases; and (7) make occasional but simple business decisions regarding whether to reinvest profits or distribute them to shareholders.
TOTAL HOURS WORKED (WEEKLY BASIS)
In the author's experience (running a very small three miner mining business), the average amount of time it takes to get a commercial ASIC miner running and to join a mining pool is about one hour of research and three hours of tinkering (and this was for someone with little previous experience in such matters) for a total of four hours per miner, plus or minus two hours depending on the type of miner and person. In terms of the other tasks associated with running a mining business, the author estimates that a total of roughly 20 hours per year is the maximum amount of work required to operate a small mining business. A medium-sized mining business in a commercial building should expect to spend between 10 and 50 hours per year performing employee-like tasks. A large-scale mining operation's employee-like annual hour requirements will vary substantially depending on the business owners' automation and efficiency skills but may reasonably range anywhere between 10-200 hours.
Looking at the above numbers, regarding hours spent performing employee-like tasks, it is relatively simple to figure out if the shareholders of a mining business may end up performing substantial services (see S-Corp info in section above) for the corporation. For small businesses, such as mine, the mining operator may only spend a maximum of 0.3846 hours per week (20 hours per year divided by 52 weeks) working on employee-like tasks. It is safe to assume 0.3846 hours per week does not constitute "substantial services." As such, no reasonable salary need be paid to the shareholder performing this amount of work.
For medium-sized mining businesses, the average amount of hours worked per week may range (based on 10-50 hour annual estimate provided above) between 0.1923 hours per week and and 0.9615 hours per week (# of hours per year divided by 52 weeks). Once again, it is safe to assume that 0.9615 hours per week (the highest end of the average) does not constitute "substantial services." As such, no reasonable salary need be paid to the shareholder performing this amount of work (especially if this amount of work is spread out over multiple shareholders).
For large-scale mining businesses, a special evaluation will be necessary as setup may require a substantial amount of upfront effort and may skew the number of hours being worked. Additionally, it is possible for the amount of employee-like annual hours to vary substantially year-to-year which would cause the corporation's employment tax liabilities to vary accordingly. If we assume that the 10-200 hour estimate provided above is reasonable, we can calculate an average weekly hourly output of between 0.1923 hours per week and 3.84 hours per week (# of hours per year divided by 52 weeks). If a single employee is performing 3.84 hours of work per week, it is possible this constitutes "substantial services" when performed on a consistent basis over a continuous 52-week period. Contra Davis v. United States, No. 93-C-1173 (D. Colo. 1994) (holding that an average work week of 12 hours per week does not constitute substantial services). That said, it is entirely possible that 3.84 hours per week may fall well below the standard established by Radtke v. United States, 712 F. Supp. 143 (E.D. Wis. 1989) (distinguished on other grounds) (holding "where the corporation’s only director had the corporation pay himself, the only significant employee, no salary for substantial services . . . [h]is ‘dividends’ functioned as remuneration for employment."). As always, do your own research and advise your clients accordingly. The sources identified in this article should steer you in the right direction.
Keep in mind that hiccups happen in business, and sometimes, a mining business may require long and consistent employee-like working hours by the shareholder-operator (i.e., in the event of unexpected problems). In these cases, the general principles elucidated above become muddled. As hours increase in an upward fashion, the more likely it becomes that a shareholder may need to be paid a "reasonable salary." Make sure your client is aware of this and have them call you if they anticipate working substantially more hours than expected in any given year.
Should your client encounter an unexpected and substantial increase in weekly hourly requirements, one possible option to avoid incurring employment tax liabilities is to break up the total amount of work among as many shareholders as possible to keep individual hours low. Please note that the IRS may take umbrage at this sort of gamesmanship and audit your client (please note that I have not researched this tax position; it is possible existing case law or Treasury Regulations already explicitly allow or disallow this; as always, do your own research).
Davis v. United States, No. 93-C 1173 (D. Colo. 1994) (pertains to hours worked and duties performed)
One case, Davis v. United States, No. 93-C-1173 (D. Colo. 1994), provides strong support for the position that S-Corporation shareholder mining operators, in most instances, are unlikely to be considered to have provided substantial services requiring reasonable compensation.
In Davis, the taxpayer is a S-Corporation shareholder who performed "part-time clerical duties for the company, including paying bills, submitting invoices, making bank deposits, and communicating with independent contractor truck drivers." Ms. Davis also made business decisions for Mile High and took a few business trips.
Ms. Davis was not paid a salary for her performance of these duties. Rather, Ms. Davis was paid in shareholder distributions. The IRS argued that such shareholder distributions were improper as the income received should have been classified as salary income as it was actually compensation for performance of substantial services.
Davis held for the taxpayer voiding the IRS's imposition of employment taxes by holding that such taxes were assessed in a manner that was arbitrary and capricious.
If Davis can be reasonably relied on (make your own judgment), most S-Corporation mining business shareholders will not be required to pay themselves a salary. Figure out your facts and apply the information above accordingly!
submitted by NicoRatkowski to CryptoMiningTalk [link] [comments]

Is Crypto Mining Worth it? CPU, GPU, and ASIC Mining Profitability Review Bitcoin Mining worth it? ASIC mining hardware-Bitcoin Mining 2018? Bitmain,GMO, innosilicon miners bitcoin mining site 2020  Bitcoin earning site  how to earn bitcoin fast and easy 2020 Asic Antminer S9 mine nicehash pool-Bitcoin mining nicehash profit - antminer setup-mine btc 14 THs Is Mining Bitcoin Profitable late 2019 ASIC

It’s possible, for example, to buy a Bitcoin Antminer S7 ASIC on Amazon for $714. No such miners are available for Litecoin. but they are not profitable. If you are serious about mining litecoins, but usually for hobbies and the general normal people doing it through a mining pool usually ends ups being the better choice. Antminer s9, The Most Efficient ASIC Bitcoin Miner in the World Bitcoin mining is a kind of fun and even profitable, fun if you have cheap electricity as well as efficient bitcoin mining machine. Is Mining Even Profitable Anymore? Well that totally depends! If you want to mine Bitcoins, you’ll need a purpose build hardware ASIC miner. This machine will be a big time money loser for Bitcoin. However, there are plenty of cryptocurrencies that can be profitably mined using GPU based miners. My personal favorite choice is Ethereum. I also have GPUs mining Litecoin so I agree with your point. Even at $1.76, Litecoin is currently ~600% more profitable to mine than Bitcoin with a GPU that has roughly 1:1000 scrypt to sha256 hashing ratio. If you have GPUs you can try profitability mining to mine coins even more profitable than Litecoin. There are also pools that switch for ASIC mining devices designed for mining ethereum are much more cost efficient than graphics cards. FILE PHOTO: Bitcoin mining computers are pictured in Bitmain's mining farm near Keflavik.

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Is Crypto Mining Worth it? CPU, GPU, and ASIC Mining Profitability Review

Sorry about the echo i need some foam or something to make this room not sound like its empty =p asicminervalue.com ubit pci risers https://amzn.to/2mG73Df Easy way to get started mining crypto ... Ultimately cryptocurrency mining is still profitable depending on which mining hardware you are using, what crypto coins you are mining, and what your electric rate is. This video is just one... Is GPU or ASIC Mining MORE Profitable Right Now? ... GPU, and ASIC Mining Profitability Review - Duration: 12:17. VoskCoin 10,787 views. 12:17. Should You Buy An Antminer USB Bitcoin ASIC Miner In ... Bitmain antminer s9 is the most powerful SHA256 ASIC miner for bitcoin and other SHA 256 crypto currencies, with a mining power of 14 THs (terahashes). Bitcoin has raised in price to more than ... Is it worth mining Crypto in 2019-2020? What to mine and how to mine? Mining is dead, they say. Is it true? We are going to take a look, Evgeny Latyshev, and Kirill Osaulenko, Wunderbit. You can ...

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