Topic: @ 2 Newbie Questions (Read 574 times)

I'm considering hosting machines at Gig Watt (giga-watt.com) in Washington.
Their electric rates are half of what I'd pay (in California) and I can bypass the racks, noise, heat, and pulling extra power etc for setting up my own.

The total/actual costs aren't clear yet I'm open to comments about them or others from any one that has experience with mining hosts. I'm especially curious about securing access to my own machines in a hosted environment.

Thanks

@DannyHamilton
   Thanks for the detailed response.

Yes, I'm early in the learning curve at the moment and absorbing in several directions simultaneously (block chain concepts, hardware evaluations, mining software, monitoring software, hosting options, cost benefits of all of it, and a little bit on trading coins), so a few pieces are quite set at the moment, but I'll get there. This isn't my first trip around the block in IT, it's just my 1st trip around the block chain ha ha.

Any altcoin can manage these things however they like.  So you'd have to investigate each altcoin you might consider separately.

However, transaction count and miner compensation has no effect at all on coin creation rate for Bitcoin.  The protocol manages the difficulty to keep the block rate near an average of 1 per 10 minutes, and the number of new coins per block is permanently set: Starting at 50BTC per block for the first 210000 blocks, and then cutting in half (rounding down to the nearest 0.00000001 BTC) every 210000 blocks (approximately every 4 years or so).


For Bitcoin, it is erroneous, but you're new to the concepts so it is expected that some of your assumptions might not be entirely accurate.  Ask questions here, and you'll learn quickly.


Effectively, yes.  More specifically, each new block of transactions added to the blockchain with a valid proof-of-work is allowed to assign a specific maximum amount of new bitcoin value to a set of one or more transaction outputs.  That maximum amount is currently 12.5 BTC, and is cut in half every 210000 blocks (approximately every 4 years or so).

Since the solo-miner (or mining pool operator) is responsible for "completing the verification" by building the blocks of transactions, they are in charge of where to assign that new value.  The intelligent thing to do (that most miners do) is to assign that new value to one's self (or to the participants in one's pool).


Correct.


Incorrect.

Bitcoin has a concept of "confirmations".  As soon as a transaction shows up on the network it is instantly "verified" by EVERY node, miner, and wallet on the network.  Invalid transactions won't ever even show up beyond a few poor software implementations. At that point the transaction is valid, but UNCONFIRMED.  This means that it isn't permanently stored in the blockchain yet.

At any time a replacement VALID transaction could show up and if the replacement transaction gets confirmed then the earlier replaced transaction instantly becomes invalid and is dropped from the network. For this reason, it is important for users of the bitcoin system to wait until their transaction has been included in a block of transactions in the blockchain.  The first time the transaction shows up in a block in the blockchain, it is said to have 1 confirmation.  Each additional block of transactions that get added to the chain on top of the block that contains the transaction in question is considered to be an additional "confirmation".  The more confirmations a transaction has, the deeper in the blockchain it is buried and the more difficult and expensive it would be for someone to replace that block.

Generally, 1 confirmation is enough to feel pretty confident that the transaction will not be replaced.  Depending on how risk averse you are (and the value of the transaction), you might feel more comfortable waiting for a few more confirmations (just to be sure). By the time you get to 3 confirmations, the transaction will almost certainly be permanent unless there is a significant event in the Bitcoin ecosystem that has resulted in a sustained fork of the chain.  This has only happened a few times in the history of Bitcoin.


A solo-miner is allowed to assign 12.5 new bitcoins PLUS the sum of all the transaction fees of all the transactions that they included in their block.  Participants in a mining pool typically receive a percentage of that reward that is based on the percentage of the pools total hashpower that the participant provided. Each pool has their own rules about how they distribute the earnings, and what fees are withheld for the pool operator.  You'll need to investigate the specifics of any pool you choose.


For solo-miners, it is a flat 12.5 BTC PLUS the sum of the transaction fees of all the transactions included in the block that the miner built and solved.  For pool mining, it is pool specific, and you'll need to investigate the policy of the pool you choose.


Incorrect.  The miner (or pool) builds a block of as many transactions as they can fit within the current blocksize limit.  Included in that list of transactions is the transaction that pays the miner (or pool).  So that transaction is immediately "confirmed" when the solved block is broadcast.  A block (and all the transactions in the block) only creates compensation for 1 solo-miner (or mining pool).


Bitcoin blocks are created and solved on average once every 10 minutes.  If there are unconfirmed transactions waiting to be confirmed, then they can be included in the block (up to the block size limit).  If there are not any unconfirmed transactions waiting to be confirmed, then the miner (or pool) still builds a block that includes the 1 transaction that pays themselves the 12.5 BTC block subsidy.


Don't worry about it.  Keep asking, and reading.  You'll get there.  This stuff isn't intuitive, and you'll need to escape many incorrect assumptions that you've probably already made about how this all works.  However, once you've got it all straight in your head you'll find that it's all pretty elegant the way it fits together.

The amount of complexity for mining any coin depends upon the hash rate. Every currency networks aims to maintain a block rate of certain time. Like Bitcoin aims to keep the pace at 10 minutes per block. Therefore many different miners compete with each other to mine the next block. This competition is maintained by increasing the complexity of calculations.

On average, every 10 minutes a limited amount of transactions get consolidated into a block. Each block into which a transaction is included, equals 1 confirmation. Miners get compensated by (1) a fixed block reward and (2) transaction fees. Neither has anything to do with the amount of confirmations that are needed to be sufficiently confident about a transaction's validity.

New coins are only issued in accordance to the block reward per block. The transaction fees that are paid, are already part of the money supply. Once all coins have been issued and no block reward is released, miners will only be compensated by transaction fees.


For details regarding block rewards, see here:

https://en.bitcoin.it/wiki/Controlled_supply


Regarding transaction fees, see here:

https://en.bitcoin.it/wiki/Transaction_fees


Regarding the relevance of confirmations to prevent double-spend attacks, see here:

https://en.bitcoin.it/wiki/Confirmation

OK, changing complexity based on available hashing power makes sense ... but gives me a couple of other questions

It seems like the number of transactions and miner compensation would also effect the coin creation rate

I haven't studied the compensation system yet, so some of this may be erroneous.

If i understand correctly the only way bitcoins are created is as compensation for miners completing the verification. Is that correct?
If some one wants to just buy a bit coin they have to buy from an existing owner?

Verifying a transaction takes a number of independent verifications correct?  3 or 6 or some thing like that?

How much compensation is paid? Is it a flat fee per transaction verification or does it depend of the value of the transaction?

This creates an increasing cascade of coin creation. If one transaction creates compensation for 6 miners (or pools) then that creates 6 more transactions to verify each of which creates more compensation.

Without the cascade, coin creation would be dependent on transactions (not just hashing power) for new coin creation. If no one created transactions no new coins would be created.

... This can't be right ... I must have this wrong.

Bitcoin's mining difficulty is decided by the protocol based on the average block time of the last 2016 blocks, which equals 2 weeks assuming an average block time of 10 minutes.

If hashrate decreases, average block time increases, which leads to the protocol lowering difficulty once the difficulty period has completed.

If hashrate increases, average block time decreases, which leads to the protocol heightening difficulty once the difficulty period has completed.

For a more detailed explanation on how difficulty is determined, see here:

https://en.bitcoin.it/wiki/Difficulty


Note that Bitcoin Cash has a different difficulty adjustment algorithm than Bitcoin.

Maybe this website could help you in a way:

https://www.cryptocompare.com/mining/calculator/btc?HashingPower=4730&HashingUnit=GH%2Fs&PowerConsumption=1293&CostPerkWh=0.12

Each coin has its own separate tab for:

1. Hashing Power
2. Power consumption (w)
3. Cost per KW/h ($)

Though its only covers more on the top cryptocurrency, but I'm sure you can ask around their forum. And I assuming that there are a lot of experts in every coins.


Goodluck though. Also this forum might help you as well. Just wait till knowledgeable members chime in.

It's not based on the number of coins generated, but rather the amount of hashpower that is mining the coin. If there are more people mining Coin X, then the difficulty of Coin X will go up (unless it's some super weird coin that doesn't change difficulty). If people stop mining Coin X, then the difficulty goes down as the goal is to produce new coins at a steady rate. Here's a site where you can find the difficulty of some coins. They might produce less Bitcoin than other coins, but that Bitcoin may be worth more.


Once a transaction is sent, it is broadcasted to the Bitcoin network (assuming we're talking about bitcoin), and everyone with a node should see it unless there's something strange with the transaction. Once it's in the network, any miner can pick it up and put it in their block, if it's unconfirmed. Basically whoever finds the block gets their pick of what transactions go in it, and it's not really a competition as you can't speed up block finding without adding more hashrate. A factor beside raw hashrate that would help you gain more transactions would be to set your node to mine the smallest transactions (instead of the highest fee ones). You'd get more transactions, but maybe earn less in fees.

if hashing power decreases, lets say miners goes and mines bitcoin cash instead of bitcoin if mining bitcoin cash becomes more profitable for them.,
so will difficulty decreases ? or will stall at current level ?

who decides this difficulty ?
consensus ?

thanks

Actually difficulty increase is not based on how many coins have been "generated", but rather on the amount of hashing power available in the network. The difficulty is set every 2 weeks so that regardless of how much hashing power is available new blocks will be found about every 10 min on average.

You are right in your assumption. While bitcoin is really hard to mine, altcoins are a LOT easier to mine.

I'm new to mining, but have 20+ years in IT. Just started research on building a miner.
Just getting started on the learning curve, but spent years as an enterprise sys admin, so I'm sure I'll figure it out, but I have a couple of questions bouncing around in my head that i haven't found any info on.


1. As the number of coins generated increases the complexity/calculation load increases. I assume different currencies are at different complexity levels due to their age and the number of coins generated, so hardware that might be mediocre for BitCoin might be more than adequate for another coin, so I 'm looking for on the complexity/calculation load for various coins.

Does any one have an information source with this info?

2. I'm looking for, but haven't found anything yet on competing for transactions. Comparing pools (which ones are best for different coins) and what factors besides raw crypto power influence getting more transactions?


Thanks for any help.