Paper: Crypto Currency Mining

Crypto-Currency Mining Computer Architectures

Hugo Rodrigues Silicon Valley, USA

[email protected]

Abstract—Crypto-currencies usage is growing in a more connected world. The traditional banking industry is being disrupted by a decentralized network, rich in computing resources and connectivity.

Keywords—Computing; Hardware; Hash; Mining; GPU; CPU; Bitcoin; Blockchain; Consensus; Ledger; Mathematical; Energy;

I. INTRODUCTION

Internet and computing development along time opened a myriad of opportunities to change the way society lives and interacts. This paper presents a new platform focused on disrupting financial markets, more precisely the centenary commonly accepted laws and rules regarding currency utilization across the world. Focusing on the strategy and tactics of arising technology improvements, this work will create awareness about the industry and gather information to lead to a viable way of joining the race at the current state.

II. CRYPTO-CURRENCIES

A. FundamentalsBitcoin became the first decentralized cryptocurrency in

2009[1]. Since then, numerous cryptocurrencies have been created. These are frequently called altcoins, as a blend of bitcoin alternative. Bitcoin and its derivatives use decentralized control as opposed to centralized electronic money/centralized banking systems. The decentralized control is related to the use of bitcoin's blockchain transaction database in the role of a distributed ledger[2].

Decentralized cryptocurrency is produced by the entire cryptocurrency system collectively, at a rate which is defined when the system is created and which is publicly known. In centralized banking and economic systems such as the Federal Reserve System, corporate boards or governments control the supply of currency by printing units of fiat money or demanding additions to digital banking ledgers. In case of decentralized cryptocurrency, companies or governments cannot produce new units, and have not so far provided backing for other firms, banks or corporate entities which hold asset value measured in it. The underlying technical system upon which decentralized cryptocurrencies are based was created by the group or individual known as Satoshi Nakamoto [3].

As of March 2015, hundreds of cryptocurrency specifications exist; most are similar to and derived from the first fully implemented decentralized cryptocurrency, bitcoin. Within cryptocurrency systems the safety, integrity and balance of ledgers is maintained by a community of mutually distrustful parties referred to as miners: members of the general public using their computers to help validate and timestamp transactions adding them to the ledger in accordance with a particular timestamping scheme.

The security of cryptocurrency ledgers is based on the assumption that the majority of miners are honestly trying to maintain the ledger, having financial incentive to do so.

Most cryptocurrencies are designed to gradually decrease production of currency, placing an ultimate cap on the total amount of currency that will ever be in circulation, mimicking precious metals. Compared with ordinary currencies held by financial institutions or kept as cash on hand, cryptocurrencies are less susceptible to seizure by law enforcement. Existing cryptocurrencies are all pseudo-anonymous, though additions such as Zerocoin and its distributed laundry feature have been suggested, which would allow for true anonymity [4].

B. Industry overviewToday, there are over 700[5] digital currencies in existence.

Entry into the marketplace is undertaken by so many due to the low cost of entry and opportunity for profit making through the creation of coins.

Network effects play an important role in analyzing the development of cryptocurrency markets. Since any given currency gains use value as the number of its users increase, popularity of a certain currency is integral in that currency's success. Economists postulate that large competitors (such as the most popular cryptocurrency: bitcoin) will attract more new users due to the size of their growing exchange pools and as a result will effectively dominate the market.

A study entitled "Competition in the Cryptocurrency Market"[6] conducted by members of the NET Institute over three periods between 2013 and 2014 charts the analysis of changes in price data over time in regards to budding cryptocurrency markets. It analyzes bitcoin and other similar cryptocurrencies referred to as "altcoins". These include Litecoin, Peercoin, and Namecoin; cryptocurrencies listed in order by which account for the largest percentages of digital market capitalization behind bitcoin (which accounts for 90%).

The NET study found that of these four, all were early entrants into the digital currency marketplace, designed to correct perceived bitcoin's flaws and amass popularity in an infant market whose popularity was rapidly growing. This study introduced the question of the role of demand in cryptocurrency markets, and what impetus demand has in relation to emerging coins. The study dealt namely with two common forces of demand that shaped the market: reinforcement and substitution effects. The reinforcement effect expects demand to increase based on usership, and that the cryptocurrency that could gain the most buyers and sellers would win out above all others, thus dominating the marketplace. The substitution effect implies that as the price of bitcoins rose with increased usership, people would begin to look for other options in the cryptocurrency market, thus discouraging any one coin from gaining complete dominance.

Fig. 1. Crypto-Currency Market Capitalizations from coinchoose.com

C. Legacy banking technologyToday, the banking system is suported on a personal trust

relationship between customers and banks. Currently transactions are complex due to a virtual technology bubble that constraints each bank’s technology. Inter-relations among banks are therefore supported by standard procedures and rules that are overviwed by third party entities.

Using as an example a bank deposit and payment, the transaction flow is as:

Fig. 2. Bank deposit and payments example

Bank A’s systems record the balances for Bank A’s customers, Bank B’s systems record the balances for Bank B’s

customers and so on. Banking “facts” are usually recorded by at least two different entities and an expensive process of reconciliation is needed to make sure each party’s view of the world is the same.

III. CURRENCY AND TECHNOLOGY

Currency is an enormous business with trillions of dollars crossing borders each year, and historically an extremely inefficient and opaque one. Those conditions have made the business ripe for disruption by technology.

A. BlockchainBlockchain technology is best known for being the magic

behind Bitcoin, but there are scores of other industries that are benefiting from this revolutionary technology. Before we take a look at the industries and companies innovating in these spaces, let’s break down this technology so we are all on the same page.

Blockchain technology is a big fancy word that describes the act of recording events in a database. The database itself is referred to as the blockchain. Once data is added to the blockchain, it cannot be removed from the database or altered in any way. The blockchain therefore contains a verifiable record of history.

The technology is fairly simple yet very profound. You might already be thinking of a business idea that could utilize such a system, and many visionaries are in the same boat. Steve Wozniak, co-founder of Apple, has joined a blockchain firm. But before you go start a round of fundraising for your own blockchain-based company check out the disruption the blockchain is creating in these industries.

B. Shared ledgerBitcoin blockchain is a network of public “nodes” that

function as individual ledgers, each of which maintains a full record of all of the transactions ever executed on the network. Unlike traditional, centralized ledger systems that rely on a single trusted party to maintain an accurate database of transactions, blockchain transaction authentication is achieved by arrangement of data “blocks” and “chains” that are validated through the consensus of all of the nodes on the network. The processing protocol and the network of nodes create the “strength in numbers” that makes blockchain processing appealing.

In its 2016 Annual Report, the United States Treasury Department's Financial Stability Oversight Council (FSOC)[7], acknowledged the potential innovation and disruption blockchain (also referred to as “distributed ledger” or “shared ledger”) technology could impose on the financial system.

According to the report, “Distributed ledger systems may mitigate risk and improve resilience in financial networks in a number of ways. Because distributed ledgers can be designed to be broadly accessible and verifiable, they could provide a valuable mechanism for enhancing market transparency. By eliminating the need for some transactions to flow through

trusted third parties, distributed ledgers could reduce concentrated risk exposures to those firms and infrastructures. In addition, by improving the speed and accuracy of settlement systems, distributed ledger systems could reduce the counterparty and operational risks which arise when financial assets are exchanged.”

C. Ledger transactionTransactions typically involve various participants like

buyers, sellers, and intermediaries (such as banks, auditors, or notaries) whose business agreements and contracts are recorded in business ledgers. A business typically uses multiple ledgers to keep track of asset ownership and asset transfers between participants in its various lines of businesses. Ledgers are the systems of record (SORs) for a business's economic activities and interests.

Fig. 3. Typical business ledger transactions

D. Network evolutionA centralized ledger network controls the flow of

information and operational control from a single central point. A distributed ledger network [8] spreads computational workload across multiple nodes in a network. A decentralized ledger network allows nodes to make independent processing and computational decisions irrespective of what other peer nodes may decide.

Fig. 4. The 3 network topologies for business ledgers

It is not unusual for distributed systems to also be decentralized (as is the case for a bitcoin network). What is unique about a blockchain network is its decentralized consensus mechanism. All validating nodes in the network run the same (agreed-upon) consensus algorithm against the same transactions, and thus validate (or invalidate) each transaction. Valid transactions are written to the ledger.

E. Distributed consensusThe main hypothesis is that the blockchain establishes a

system of creating a distributed consensus in the digital online world. This allows participating entities to know for certain that a digital event happened by creating an irrefutable record in a public ledger. It opens the door for developing a

democratic open and scalable digital economy from a centralized one. There are tremendous opportunities in this disruptive technology and revolution in this space has just begun.

IV. CRYPTOGRAPHY

A. Hashing functionsCreation of a bit string (digest) representing integrity of

content other string. Changing one character in the original string results in complete different has. Changing multiple characters in original string that results in the same hash requireslarge amount of processing power for a long period of time.

B. Public & private keysTwo large prime numbers that have a mathematical relation

with each other. A string encrypted with one key can only be decrypted with the other. One key needs to be kept private, the other one can be made publicly known so that it can be used by other parties to exchange data with you in a secure manner. Private keys need to be stored that it is accessible only for owner. This can be done on personal devices (PC, smart card, USB stick, phone, …) or remotely with a service provider (cold and hot wallets).

C. EncryptionScrambling of clear text with the public key of the recipient

so that the holder of that private key is the only one that can descramble the message. This is used to guarantee the confidentiality of the data exchanged.

Wallet encryption uses AES-256-CBC to encrypt only the private keys that are held in a wallet. The keys are encrypted with a master key which is entirely random. This master key is then encrypted with AES-256-CBC with a key derived from the passphrase using SHA-512 and OpenSSL's EVP_BytesToKey and a dynamic number of rounds determined by the speed of the machine which does the initial encryption (and is updated based on the speed of a computer which does a subsequent passphrase change). Although the underlying code supports multiple encrypted copies of the same master key (and thus multiple passphrases) the client does not yet have a method to add additional passphrases.

At runtime, the client loads the wallet as it normally would, however the keystore stores the keys in encrypted form. When the passphrase is required (to top up keypool or send coins) it will either be queried by a GUI prompt, or must first be entered with the walletpassphrase RPC command. This will change the wallet to "unlocked" state where the unencrypted master key is stored in memory (in the case of GUI, only for long enough to complete the requested operation, in RPC, for as long as is specified by the second parameter to walletpassphrase). The wallet is then locked (or can be manually locked using the walletlock RPC command) and the unencrypted master key is removed from memory.

When the wallet is locked, calls to sendtoaddress, sendfrom, sendmany, and keypoolrefill will return Error -13: "Error: Please enter the wallet passphrase with walletpassphrase first."

When the wallet is unlocked, calls to walletpassphrase will fail. The moment a wallet is encrypted, a passphrase is required to top up the keypool, thus, if the passphrase is rarely entered, it is possible that keypool might run out. In this case, the default key will be used as the target for payouts for mining, and calls to getnewaddress and getaccount address will return an error. In order to prevent such cases, the keypool is automatically refilled when walletpassphrase is called with a correct passphrase and when topupkeypool is called (while the wallet is unlocked). Note that the keypool continues to be topped up on various occasions when a new key from pool is used and the wallet is unlocked (or unencrypted).

D. Digital signatureEncryption of hash representing of original data to be

secured with the private key of the sender (called digital signature) that is decrypted by the recipient with the public of the sender. If the decrypted hash matches the content of the original data it implies two things. First, the encryption can only be performed with the private key corresponding with public key and secondly, the original data can’t be tampered with.

V. MULTI-SIGNATURE ADDRESSES

A multi-signature address is an address that is associated with more than one ECDSA private key. The simplest type is an m-of-n address - it is associated with n private keys, and sending bitcoins from this address requires signatures from at least m keys. A multi-signature transaction is one that sends funds from a multi-signature address.

A. AplicationThe primary use case is to greatly increase the difficulty of

stealing the coins. With a 2-of-2 address, you can keep the two keys on separate machines, and then theft will require compromising both, which is very difficult - especially if the machines are as different as possible (e.g., one pc and one dedicated device, or two hosted machines with a different host and OS).

It can also be used for redundancy to protect against loss - with a 2-of-3 address, not only does theft require obtaining 2 different keys, but you can still use the coins if you forget any single key. This allows for more flexible options than just backups.

It can also be used for more advanced scenarios such as an address shared by multiple people, where a majority vote is required to use the funds.

Multi-signature transactions are often conflated with BIP 16 and 17. In fact they are not directly related. Multi-signature transactions have been supported by the protocol for a long

time; but implementing them would require a special output script.

VI. WALLETS

Bitcoin 1.0 can be described as a simple send-receive system. In a Bitcoin account, there is a set of 34-character Bitcoin addresses, similar to:

MMC: MGM8jcq6F8gN7vCt6eZaTBQA6PoeA94zke Quark: QitSWH9ZVZaadyVzRbLM1ZuKnJxrjgLKYA LiteCoin: LVtAdoLmgJgcZaqUXCHYQxnEqAZwbYCZeX EarthCoin: eRi2NVviQoDDFVunG7pGbQ2sYSWsLAcTJP DigiByte: DELB1n6z6R5JJdvwQLkqwqizsSDZYE4gGY

are used to receive bitcoins, and each address has an associated 64-character private key, in this case:

c4bbcb1fbec99d65bf59d85c8cb62ee2db963f0fe106f483d9afa73bd4e39a8a

can be used to spend bitcoins that are sent to the address. Private keys need to be kept safe and only accessed when you want to sign a transaction, and Bitcoin addresses can be freely handed out to the world. And that's how Bitcoin multi-sig wallets are secured. If you can keep the single private key safe, everything's fine; if you lose it the funds are gone, and if someone else gains access to it your funds are gone too - essentially, the exact same security model that we have with physical cash, except a thousand times more slippery. The technology referred as Bitcoin 1.5, is a concept that was first pioneered and formalized into the standard Bitcoin protocol in 2011 and 2012: multi signature transactions.

In a traditional Bitcoin account, as described above, you have Bitcoin addresses, where each address has one associated private key that grants the keyholder full control over the funds. With bitcoin multi signature addresses, you can have a Bitcoin address with three associated private keys, such that you need any two of them to spend the funds. Theoretically, you can have one-of-three, five-of-five, or six-of-eleven addresses too; it just happens that two-of-three is the most useful combination.

A. Generation of Multi SignatureA 2-of-3 MULTI-SIG address can be created by following

these steps:

Gather (or generate) 3 bitcoin addresses, on whichever machines will be participating, using getnewaddress or getaccountaddress RPC commands.

Get their public keys using the validateaddress RPC command 3 times.

Then, create a 2-of-3 multi-sig address using addmultisigaddress; e.g.

bitcoind addmultisigaddress 2 '["044322868cb17d64dcc22185ae2d4493111d73244c3668f8ac79ecc79c0ba8d30a6756d0fa20157

709af3281cc721c7f53321a8cabda29b77900b7e4fe0174b114","..second pubkey..","..third pubkey.."]’

addmultisigaddress returns the multi signature address

Public keys are raw hexadecimal and don't contain checksums like bitcoin addresses do.

Send funds into that 2-of-3 transaction using the normal sendtoaddress / sendmany RPC commands.

B. Choose Your Own ArbitratorThe first major use case of multi-sig protocol is consumer

protection.

When making a payment with a credit card, if a claim needs to be put later without getting the product it is possible to request a "chargeback". The merchant can either accept the chargeback, sending the funds back (this is what happens by default), or contest it, starting an arbitration process where the credit card company determines who argues for the better case.

With Bitcoin (or rather, Bitcoin 1.0), transactions are final. As soon as a product is paid, funds are send. And in Bitcoin 1.0, this is a good procedure; although it harms consumers to not have chargebacks, we would argue, it helps merchants more, and in the long term this would lead to merchants lowering their prices and benefitting everyone. In some industries, this argument is very correct; in others, however, it's not. Bitcoin 1.5 instead providing a real solution to the problem: escrow. Multi signature escrow works as follows:

When Alice wants to send $20 to Bob in exchange for a product, Alice first picks a mutually trusted arbitrator, whom we'll call Martin, and sends the $20 to a multi-sig between Alice, Martin and Bob. Bob sees that the payment was made, and confirms the order and ships the product. When Alice receives the product, Alice finalizes the transaction by creating a transaction sending the $20 from the multi-sig to Bob, signing it, and passing it to Bob. Bob then signs the transaction, and publishes it with the required two signatures.

Alternatively, Bob might choose not to send the product, in which case he creates and signs a refund transaction sending $20 to Alice, and sends it to Alice so that Alice can sign and publish it. Now, what happens if Bob claims to have sent the product and Alice refuses to release the funds? Then, either Alice or Bob contact Martin, and Martin decides whether Alice or Bob has the better case.

Whichever party Martin decides in favor of, he produces a transaction sending $1 to himself and $19 to them (or some other percentage fee), and sends it to that party to provide the second signature and publish in order to receive the funds. Currently, the site pioneering this type of approach bitrated.com; the interface at Bitrated is intuitive enough for manual transactions such as contracts and employment agreements, but it is far from ideal for consumer to merchant payments. Ideally, marketplaces and payment processors like BitPay would integrate multi-sig technology directly into their payment platform, and Bitcoin multi-sig wallets would include an easy interface for finalizing transactions; if done correctly, the experience can be exactly as seamless as Bitpay or Paypal are today. So all in all, given that this multi-sig approach does

require intermediaries who will charge fees, how is it better than Paypal?

First of all, it's voluntary. In certain circumstances, such as when you are buying from a large reputable corporation or when you're sending money to an employee or contractor you have an established relationship with and trust, intermediaries are unnecessary; plain old A to B sends work just fine. Sending to charities is a similar circumstance, because charities don't really owe you anything when you send them money in any case. Second, the system is modular. Sometimes, the ideal arbitrator for a particular transaction is a specialized entity that can do that particular job much better; for example, if you're selling virtual goods the ideal arbitrator would be the operator of the platform the virtual goods are on, since they can very quickly determine whether a given virtual good has been sent. At other times, you might want a generic arbitrator, but you're in an industry where mainstream providers are too squeamish to handle the task. And, of course, at other times a generic institution similar to Paypal is indeed the best approach. With bitcoin multi-sig wallets, you can easily choose a different arbitrator with every single transaction, and you only pay when you actually use arbitration; transactions that go through as planned are 0% fee.

The company leading the charge with Bitcoin multi-sig wallet technology is Armory [9]. They already innovated the entire concept of cold storage and are the leading provider of enterprise grade Bitcoin security software. Now they released Lockboxes. With Armory you are in complete control of the creation and storage of all Bitcoin private keys. Additionally, each key in the bitcoin multi-sig wallet can be protected with its own security profile.

C. Multi signature transaction walletsAnother company bringing Bitcoin 1.5 technology to the

world at large is CryptoCorp [10], and the core offering is something that a large number of people have been trying to implement and push forward for nearly a year: multi signature transaction wallets. The way that a multi signature bitcoin wallet works is simple. Instead of the Bitcoin address having one private key, it has three. One private key is stored semi-securely, just as in a traditional Bitcoin wallet. The second key the user is instructed to store safely (e.g. in a safety deposit box), and the third key is stored on the server.

Normally, when a wallet owner wants to spend funds, the wallet would make a transaction and sign it locally, and then it would pass the transaction on to the server. In the simplest implementation, the server would then require you to input a code from the Google Authenticator app on your smartphone in order to provide a second verification that it is indeed you who wants to send the funds, and upon successful verification it would then sign the transaction and broadcast the transaction with two signatures to the network.

When picking this basic idea, and applying two major improvements it is possible to excel the outcome. First of all, a new technology is being introducing that is referred as "hierarchical deterministic multi signature" (HDM) wallets; that is, instead of having three private keys, there are three deterministic wallets (essentially, seeds from which a

potentially infinite number of private keys can be generated). Address 0 of the HDM wallet is made by combining public key 0 from the first seed, public key 0 from the second seed and public key 0 from the third seed, and so on for addresses 1, 2, etc. This allows wallets to have multiple addresses for privacy just like Bitcoin wallets can, and the multi signature signing can still be performed just as before.

Second, and more importantly, more than just doing two-factor authentication, every time a server receives a transaction to co-sign, it will run the transaction through a complex machine-learning fraud-detection model taking into account the amount, the frequency and amount of prior transactions and the identity of the recipient, and will assign the transaction a risk score. If the risk score is low, the server will simply co-sign the transaction without asking. If the risk score is higher, the server can ask for a standard two-factor confirmation via Google Authenticator or by sending a code as a text message to the user's phone number. Email confirmation is another option. At very high risk levels, the server would flag the transaction for manual review, and an agent may even make a phone call or require KYC-style verification. What is important to note is that none of this is new; such risk metric schemes have been in use by mainstream banks and financial institutions for over a decade, and they have existed in low-tech form in the form of withdrawal limits for over a century.

Multi signature transaction wallets marry these benefits of the traditional financial system with the efficiency, and trust-free nature, of Bitcoin - even if a server denies a transaction it still is possible to process it yourself by getting your second key from your safety deposit box, and if the server tries to seize your funds they would not be able to, since they only have one key.

VII. TRANSACTION ORDER PROTECTION

Crypto-currencies use various timestamping schemes to avoid the need for a trusted third party to timestamp transactions added to the blockchain ledger.

A. Proof-of-work schemesThe first timestamping scheme invented was the proof-of-

work scheme. The most widely used proof-of-work schemes are based on SHA-256, which was introduced by bitcoin, and script, which is used by currencies such as Litecoin. The latter now dominates over the world of cryptocurrencies, with at least 480 confirmed implementations [11].

Some other hashing algorithms that are used for proof-of-work include CryptoNight, Blake, SHA-3, and X11.

B. Proof-of-stake and combined schemesSome crypto-currencies use a combined proof-of-

work/proof-of-stake scheme. The proof-of-stake is a method of securing a cryptocurrency network and achieving distributed consensus through requesting users to show ownership of a certain amount of currency. It is different from proof-of-work systems that run difficult hashing algorithms to validate

electronic transactions. The scheme is largely dependent on the coin, and there's currently no standard form of it.

C. Mathematical protectionConsidering that the transactions are passed node by node

through the Bitcoin network, there is no guarantee that orders in which they are received at a node are the same order in which these transactions were generated.

Fig. 5. Double spending due to propagation delays in peer-to-peer network

This means that there is need to develop a mechanism so that the entire Bitcoin network can agree regarding the order of transactions, which is a daunting task in a distributed system.

Fig. 6. Generation of Blockchain from unordered transactions

The Bitcoin solved this problem by a mechanism that is now popularly known as Blockchain technology. The Bitcoin system orders transactions by placing them in groups called blocks and then linking these blocks through what is called Blockchain. The transactions in one block are considered to have happened at the same time. These blocks are linked to each-other (like a chain) in a proper linear, chronological order with every block containing the hash of the previous block.

There still remains one problem. Any node in the network can collect unconfirmed transactions and create a block and then broadcasts it to rest of the network as a suggestion as to which block should be the next one in the blockchain. How does the network decide which block should be next in the blockchain? There can be multiple blocks created by different nodes at the same time. One can’t rely on the order since blocks can arrive at different orders at different points in the network.

Bitcoin solves this problem by introducing a mathematical puzzle: each block will be accepted in the blockchain provided

it contains an answer to a very special mathematical problem. This is also known as “proof of work”—node generating a block needs to prove that it has put enough computing resources to solve a mathematical puzzle. For instance, a node can be required to find a “nonce” which when hashed with transactions and hash of previous block produces a hash with certain number of leading zeros. The average effort required is exponential in the number of zero bits required but verification process is very simple and can be done by executing a single hash.

D. Transaction function This mathematical puzzle is not trivial to solve and the

complexity of the problem can be adjusted so that on average it takes ten minutes for a node in the Bitcoin network to make a right guess and generate a block. There is very small probability that more than one block will be generated in the system at a given time. First node, to solve the problem, broadcasts the block to rest of the network. Occasionally, however, more than one block will be solved at the same time, leading to several possible branches. However, the math of solving is very complicated and hence the blockchain quickly stabilizes, meaning that every node is in

Fig. 7. Mathematical race to protect transactions-I3.

The network only accepts the longest blockchain as the valid one. Hence, it is next to impossible for an attacker to introduce a fraudulent transaction since it has not only to generate a block by solving a mathematical puzzle but it has to at the same time mathematically race against the good nodes to generate all subsequent blocks in order for it make other nodes accept its transaction & block as the valid one. This job becomes even more difficult since blocks in the blockchain are linked cryptographically together.

VIII. MINING Mining is the process of adding transaction records to

Bitcoin's public ledger of past transactions or blockchain. This ledger of past transactions is called the blockchain as it is a chain of blocks.

The nodes use the blockchain to distinguish legitimate transactions from attempts to re-spend coins that have already been spent elsewhere. The primary purpose of mining is to allow nodes to reach a secure, tamper-resistant consensus.

Mining is also the mechanism used to introduce Bitcoins into the system: Miners are paid any transaction fees as well as a "subsidy" of newly created coins.

This both serves the purpose of disseminating new coins in a decentralized manner as well as motivating people to provide security for the system.

Bitcoin mining is so called because it resembles the mining of other commodities: it requires exertion and it slowly makes new currency available at a rate that resembles the rate at which commodities like gold are mined from the ground.

A. Computationally-Difficult Problem Mining network difficulty is the measure of how difficult it

is to find a new block compared to the easiest it can ever be. It is recalculated every 2016 blocks to a value such that the previous 2016 blocks would have been generated in exactly two weeks had everyone been mining at this difficulty. This will yield, on average, one block every ten minutes.

As more miners join, the rate of block creation will go up. As the rate of block generation goes up, the difficulty rises to compensate which will push the rate of block creation back down. Any blocks released by malicious miners that do not meet the required difficulty target will simply be rejected by everyone on the network and thus will be worthless.

B. Block Reward When a block is discovered, the discoverer may award

themselves a certain number of bitcoins, which is agreed-upon by everyone in the network. Currently this bounty is 25 bitcoins; this value will halve every 210,000 blocks. See Controlled Currency Supply.

Additionally, the miner is awarded the fees paid by users sending transactions. The fee is an incentive for the miner to include the transaction in their block. In the future, as the number of new bitcoins miners are allowed to create in each block dwindles, the fees will make up a much more important percentage of mining income.

C. Mining software The mining software consists in adapting algorithms and

functions into different platforms, fulfilling the particularities in the instruction set for each technology.

The software Yet Another Miner (Yam) turns mining possible for a diversity of hardware platforms. At the date of this paper, M7k version of yam miner is available. It contains reduced memory mode for MMC, improved performance and connection stability.

The M7k version of yam allows efficient CPU mining of MemoryCoin with all threads even with 1Gb RAM used for mining. Yam M7k runs significantly faster on AVX2 CPUs (Haswell) and has improved CPU load profile for overclocked configurations.

This software is also available to other multiple platforms:

• Sandy bridge

• Ivy bridge

• Pentium

• Core2

• K8

• Etc.

Next, there are described the steps to use this mining application and implement a mining station.

./yam -c yam-mmc.cfg

YAM - Yet Another Miner by yvg1900

yam M8a-linux64-haswell/yvg1900

**************************************************

* Supported coins: PTS MMC MAX GRS DMD MYR BCN QCN FCN XMR XDN LTC DRK BCR *

* Author: yvg1900 (Twitter @yvg1900) *

* *

* Addresses for Thanks and Donations: *

* PTS: PZxsEQoiMeB6tHcW2ZySBEiCPio1WkxbEL *

* XPM: AW2388DEWNEfMH4rP9kcj9yKcMq1QywYT4 *

* DTC: D6PmUogMigWvXurgFTqm5VLxQeVpXdYQj3 *

* MMC: MVk7PuJCa9o6qTYeiQRJDd3uHxKXMrQuU6 *

* LTC: Lby4YjhcAxhmbsdHFb4nYydrwGoiJezZt1 *

* BTC: 1FxekeK5La7AuF3oxiLzPKnjXyLMrux6VT *

* NMC: N9KXqmzEqP7gB2dGHpEZiRMgFjUHNM38FR *

* MAX: mTEsqg9dp3U9YXwduKxhhhDx1TRPBcNRvA *

* NRS: 9qwyC34MCZ9XGopaNDNTnaMBtjAZhHvBd3 *

* GRS: FpHaQNJ2nMUc2kgBbzYue13E9VUfL8YbQp *

* DMD: dEQZa7W7AczvUsjJkvWWrim1j8ZtgbAwXv *

* MYR: MFDpLPThL6D6vtWW42XobFNBpPdrJFPQb6 *

* DRK: XvRxZEWcKVqrPLqPjBFmwVa8FnSELCpyGc *

* BCR: 5wUcc3k19mQkgb3AhGyMeULDjT3Ney62Mb *

* XMR: 45w9aqVA6iVeMJ6jVHZPEyPqgVnBEAGhBBqGAW9ncXp44qbZy9vXkd2KpqYwcyVTQHF1kaSJm97GyceP3Y2dRMd7E9gyuZf

*

* BCN: 2AcGMZmmNWTiLvAg5n7ywMCAxXTxysYGsi1xzba2ok4UPccWTLqRyKN7EnQYUpEWpqBw1c9EVZrqo2CUG8f8mbjG5NA9njF

*

* QCN: 1V6wZP6aycYPbeafHxPcvaQfGs4M5kabHDQoTEsyCTT3HjccMyQbvEVNPoJuRc79XrPRYWESiAezyipWojpZ8bii3kczNgW

*

* FCN: 6rNjXkY5YQzWiTMmDUbL5gYTWx9UTdUMSA98S1G3cTmhZN9Xp6kq4woGeoK5Q8B3fPZV6TFKs36zdHpZnYxA4BFK3fLpJzW

*

* XDN: ddde7SyPF9RRjnjCL6NbX3JTwpnMTLcFs1KP54fEkK6bcdbmELxt95aMNfn4bkxkv3geZQNBzrdWnTV1XKzi4VgK2EeJ2dqtd

*

**************************************************

Loading config file [yam-mmc.cfg]

Miner version: yam M8a-linux64-haswell/yvg1900

Checking target [stratum+tcp://[email protected]:8080/mmc]...

Target OK


Target OK


Target OK

Checking mining params [mmc:av=1&aesni=on&m=1024&donation-interval=50]...

Mining Params OK

Checking MMC Stage 1 optimizations compatibility...

Checking MMC Stage 2 optimizations compatibility...

OK: MMC optimizations are compatible

MemoryCoin: Memory usage 1024M, Algorithm Variation 1

Using 24 CPU mining threads as 1 workers

Will mine 4 rounds for miner developers to support development of the next version

MMC Agg. SPM: ?, HPM: ?; Rnds C/I: 0/0, Don. C/I: 0/0; Cfg/Wkr SPM: ?/?, Cfg/Wkr HPM: ?/? 0 rnds AV=1, ART=?

mmc-square.com: Connecting, Shares Submitted 0, Accepted 0

shrine.mmc-square.com: Connecting, Shares Submitted 0, Accepted 0

santana.mmc-square.com: Connecting, Shares Submitted 0, Accepted 0

IX. HARDWARE Nowadays, the most mature hardware platforms avaiable

on the market gravitate around Intel. The Intel Xeon processor was the most common platform used for mining. However, the reward for joining the mining community works as a positive motivation and leads to growth.

Poor performance doing calculations results in the loss of the computational mathematical race, thus loss of mining fees. The growth is pushing manufactures reacting and to adapt to this new growing trend that is building a new market.

The proliferation of new products on the market is creating new challenges about how to invest into this industry. One solution in place is performance and quality measurement, pulling some metrics who are common to current hardware in place. The most important metrics regarding these aspects are: Volume of hash processing (1), Energy efficiency (2), and Power consumption (3):

(1) Mhash/s

• Millions hashes per second (also GH/s G for Giga or TH/s T for Tera)

• Double sha256 raw speed performance

(2) Mhash/J

• Millions hashes per joule (also GH/j G for Giga)

• If 1 joule of energy is 1 watt during 1 second:

1 J = 1 W x s

(3) W

• Watt

• Maximum power consumption, i.e. energy per unit of time: 1 W = 1 J/s

A. Specialized architectures At first, miners used their central processing unit (CPU) to

mine, but soon this wasn't fast enough and it bogged down the system resources of the host computer. Miners quickly moved on to using the graphical processing unit (GPU) in computer graphics cards because they were able to hash data 50 to 100 times faster and consumed much less power per unit of work.

During the winter of 2011, a new industry sprang up with custom equipment that pushed the performance standards even higher. The first wave of these specialty bitcoin mining devices were easy to use Bitcoin miners were based on field-programmable gate array (FPGA) processors and attached to computers using a convenient USB connection.

FPGA miners used much less power than CPU's or GPU's and made concentrated mining farms possible for the first time.

Today's modern and best bitcoin mining hardware are Application-specific integrated circuit (ASIC). Miners have taken over completely. These ASIC machines mine at unprecedented speeds while consuming much less power than FPGA or GPU mining rigs. Several reputable companies have established themselves with excellent products.

ASICs are bitcoin mining hardware created solely to solve Bitcoin blocks. They have only minimal requirements for other normal computer applications. Consequently, ASIC Bitcoin mining systems can solve Bitcoin blocks much quicker and use less electricity or power than older bitcoin mining hardware like CPUs, GPUs or FPGAs.

The core part of Bitcoin mining is performing a double SHA-256 hash digest and comparing the result against the target. In 2013, the first Bitcoin ASIC miners appeared on the market. Since then, mining ASIC technology advanced both in terms of the manufacturing technology (the node) and in terms of design, to achieve greater hashing rates, lower power consumption and lower cost.

ASIC miners are now being designed and manufactured for the 16 nm CMOS semiconductor device fabrication process. However not much is known about the design optimizations and trade-offs each company has applied to the design in order to be competitive. That information is probably confidential.

New designs stretch to several optimization techniques such as pipelining, delay balancing, loop unrolling, the use of Carry-Save adders (CSA), Carry-Lookahead Adders (CLA), and Hierarchical CLA. Nevertheless, is seems that there after 2 years of advances there is little room to improve Bitcoin ASIC designs and so the industry will reach the same limits as state-of-the-art microprocessor manufacturing and further improvements will rely solely on Moore’s law. But this is incorrect.

The majority of the Bitcoin mining industry is making the false assumption that Bitcoin mining relates to computing a cryptographic hash function of a message. Cryptography is based on number theory, where there is no room for computing errors. In many cryptographic schemes, such as in digital signatures, hardware faults that end up with the generation of incorrect signatures may fully compromise the security of the private keys.

There are several attack techniques that exploit this extreme reliance of cryptography on accurate computing in order to steal secrets. Standard public key cryptography is also based on number theory, and so there is little room for mathematical approximations, nor tolerance for faults in computation. But Bitcoin mining is a trial and error procedure: computations that do not lead to a block solution are discarded. Once a block solution is found, the solution is generally verified by software, firmware or hardware to check its correctness, so a small failure rate in the hardware does not lead to any catastrophic money loss. Hardware failures, at controlled rates, does not pose any risk to mining.

Because of the confusion and diffusion properties of the SHA-256 hash function, the intermediate values, the SHA-256 state, tend to behave as a uniform random variable: algebraic relations within the inputs are destroyed and statistical bias is reduced after each SHA-256 round. Because of this, an approximate adder that deterministically fails on some simple additions (such as 0xFFFFFFFF+1) does not pose any particular risk.

In computing, higher hardware failures are a trade-off for lower power consumption, higher clock rate, a reduced number of logic gates in circuits or shorter critical delays in circuits. In SHA-256 miners, the most components that consume the higher area are adders, often implemented as CLAs to reduce the critical propagation delay. Also the number of additions performed is low compared with the number of additions required in mining script based cryptocurrencies like Litecoin.

A canonical SHA-256 round design, as proposed by Dadda et al. [12] would use 3 CLAs (and 8 CSA) in each round, so a full double SHA-256 core would perform 384 CLA additions. What if we replace each adder by an approximate adder, allowing a controlled failure rate, so that the total probability of failure is still kept small?

A candidate that stands out for approximation for which we can control the failure rate is the carry propagation. We can gain some performance exploiting the facts that a high percentage of die area is required by addition circuits and low number of additions are actually performed so the cumulative error probability can be kept small.

The propose of a new type of adder: a Carry-Reduced adder. A carry reduced adder does not propagate the carry from every significant bit to every more significant bit. Propagation longer that a certain length is ignored. When a carry should have been propagated, but was not, we said there was a carry propagation failure (CPF).

These failures are expected by design and incorrect results produced by failures must be detected and discarded afterward if they lead to a supposed block solution. An adder that suits well to be carry reduced is the CLA. A typical n-bit CLA consist of the Sigma blocks (which computes the P (propagation) and G (generation) signals) and the Carry Lookahead Generator block (CLG) which computes the n carries. In SHA-256 the last carry is unused and only (n-1) carries are computed.

The CR-CLA overall design also mimic this structure, but at least one CLGs is replaced by a carry reduced CLG (CR-

CLG). A CR-CLA generates a correct output with high probability if the two are independent random variables, but uses less gates and have less delay than a standard CLA.

Extensions of the CR-CLA design to hierarchical designs can be naturally created in a similar way of hierarchical CLAs. The CR-CLG block of the CR-CLA adder can be placed at one level and another CR-CLG at higher level. Also a standard CLG can be placed at one level and CR-CLG at higher levels. A (k,n)-CR-CLA adder is a n-bit CLA where the carry at bit c(i) is computed using the propagation (P(j)) and generation (G(j)) signals of the at most k contiguous bits of lower significance adjacent to the bit i, where 0<k<n. The case k=n would be a standard n-bit CLA. The reduction in the number of inputs used to compute each carry (the carry generation logic) allows the saving of logic gates and the reduction of the delay. Figure 1 shows a (4,5) CR-CLA with input carry. Each carry takes into account no more than 4 previous carries.

A carry propagation failure (CPF) as the event where a (k,n)-CR-CLA gives an incorrect value as result compared to the mathematical addition. For n=32, k=13, the CPF probability computed by simulation is 0.027%. For k=16, n=32 and 386 additions, the rate of failure of the whole double SHA-256 core is approximately 2.2%. The reduction in die area by reducing CR-CLG levels should allow more than 2.3% additional cores to be added, and so the resulting chips is more efficient.

Fig. 8. Carry Propagation Failure

A standard CLA (or mostly any other kind of adder) that is not given enough operation time (a reduction in the clock interval) to adequately propagate the carry signal behaves similar to a CR-CLA to some extent. It could behave better or worse depending on the gate placing, temperature, nearby wires, electromagnetic radiation, wire length, capacitance, load and other factors. For example, in a standard 32-bit ripple adder we can assume it will have a delay of 16 gates, instead of 32 gates, and allow a failure rate. If the node technology allows it, we could overclock at 2x a SHA-256 ASIC that uses ripple adders, and get achieve a better mining rate.

Other adders, such as parallel prefix adders (Ladner-Fischer adder, Kogge-Stone adder, Brent-Kung adder, Han-Carlson adder) could can also be reduced in carry propagation by removing unnecessary dependencies on the associated graph structures.

Many Tera-operations per second of hash-compute power are being added to the network at the moment that months of delay can render a machine practically useless. The difficulty factor – some 65 leading zeroes – is now so high that even a single TerraMiner machine might not provide a successful result during its lifetime, according to the CTO of Cointerra.

The machines need to be deployed in bulk to guarantee successful mining, which is why individual miners have formed into collectives that divide up the work and the spoils. Barkatullah said the company has shipped more than 5000 systems so far, representing about 4 per cent of the total processing capacity on the Bitcoin network now.

One unusual aspect of a machine like this is that it needs barely any external I/O – each new input arrives every few seconds.

Fig. 9. Architecture of the Goldstrike ASIC

It's a different matter inside the chip. Internally, the chip runs at 1GHz, with a central controller determining how values are fed to an array of deep pipelines tuned for hash generation. At any one time, a total of 128 nonce candidates are making their way through the 16 'super-pipelines'. To support the clock speed, Cointerra opted for the 28nm HPP process from GlobalFoundries, using nine metal layers. To improve the density of processors in the final system, four chips are put into a single FBGA package.

B. Specialized products As Bitcoin mining increases in popularity and the Bitcoin

price rises so does the value of ASIC Bitcoin mining hardware. As more Bitcoin mining hardware is deployed to secure the Bitcoin network the Bitcoin difficulty rises. This makes it impossible to profitably compete without a Bitcoin ASIC system. Furthermore, Bitcoin ASIC technology keeps getting faster, more efficient and more productive so it keeps pushing the limits of what makes the best Bitcoin mining hardware.

TABLE I. LIST WITH SPECIALIZED PRODUCTS

Miner Capacity Efficiency Price

AntMiner S1 180 Gh/s 2.0 W/Gh $299.00

AntMiner S2 1000 Gh/s 1.1 W/Gh $2,259.00


AntMiner S4 2000 Gh/s 0.7 W/Gh $1,400.00


AntMiner S5+ 7722 Gh/s 0.44 W/Gh $2,307.00

AntMiner S7 4.73 Th/s 0.25 W/Gh $479.95

AntMiner U1 2 Gh/s 1.25 W/Gh $29.00



ASICMiner BE Blade 11 Gh/s 7.72 W/Gh $350.00

ASICMiner BE Cube 30 Gh/s 6.67 W/Gh $550.00 ASICMiner BE Sapphire 0 Gh/s 7.59 W/Gh $20.00

ASICMiner BE Tube 800 Gh/s 1.13 W/Gh $320.00

ASICMiner BE Prisma 1400 Gh/s 0.79 W/Gh $600.00

Avalon Batch 1 66 Gh/s 9.35 W/Gh $1,299.00



Avalon2 300 Gh/s N/A $3,075.00

Avalon3 800 Gh/s N/A N/A

Avalon6 3.5 Th/s 0.29 W/Gh $499.95

bi*fury 5 Gh/s 0.85 W/Gh $209.00

BFL SC 5Gh/s 5 Gh/s 6.0 W/Gh $274.00

BFL SC 10 Gh/s 10 Gh/s N/A $50.00

BFL SC 25 Gh/s 25 Gh/s 6.0 W/Gh $1,249.00

BFL Little Single 30 Gh/s N/A $649.00

BFL SC 50 Gh/s 50 Gh/s 6.0 W/Gh $984.00

BFL Single 'SC' 60 Gh/s 4.0 W/Gh $1,299.00 BFL 230 GH/s Rack Mount 230 Gh/s N/A $399 (used)

BFL 500 GH/s Mini Rig SC 500 Gh/s 5.4 W/Gh $22,484.00

BFL Monarch 700GH/s 700 Gh/s 0.7 W/Gh $1,379.00

BitFury S.B. N/A N/A N/A Bitmine.ch Avalon Clone 85GH 85 Gh/s 7.65 W/Gh $6,489.00

Black Arrow Prospero X-1 100 Gh/s 1.0 W/Gh $370.00

Black Arrow Prospero X-3 2000 Gh/s 1.0 W/Gh $6,000.00

Blue Fury 3 Gh/s 1.0 W/Gh $140.00 BTC Garden AM-V1 310 GH/s 310 Gh/s 1.05 W/Gh $309.00

BTC Garden AM-V1 616 GH/s 616 Gh/s 1.05 W/Gh $350.00

CoinTerra TerraMiner IV 1600 Gh/s 1.31 W/Gh $1,500.00

Drillbit N/A N/A N/A

HashBuster Micro 20 Gh/s 1.15 W/Gh $688.00

HashBuster Nano N/A N/A N/A

HashCoins Apollo v3 1100 Gh/s 0.91 W/Gh $599.00

HashCoins Zeus v3 4500 Gh/s 0.67 W/Gh $2,299.00

HashFast Baby Jet 400 Gh/s 1.1 W/Gh $5,600.00

HashFast Sierra 1200 Gh/s 1.1 W/Gh $7,080.00

HashFast Sierra Evo 3 2000 Gh/s 1.1 W/Gh $6,800.00

Klondike 5 Gh/s 6.15 W/Gh $20.00

KnCMiner Mercury 100 Gh/s 2.5 W/Gh $1,995.00

KnC Saturn 250 Gh/s 1.2 W/Gh $2,995.00

KnC Jupiter 500 Gh/s 1.2 W/Gh $4,995.00

KnC Neptune 3000 Gh/s 0.7 W/Gh $12,995.00

LittleFury N/A N/A N/A

Metabank 120 Gh/s 1.42 W/Gh $2,160.00

NanoFury / IceFury 2 Gh/s 1.25 W/Gh N/A

NanoFury NF2 4 Gh/s 1.35 W/Gh $50.00

BPMC Red Fury USB 2.5 Gh/s 0.96 W/Gh $44.99

ROCKMINER R3-BOX 450 Gh/s 1.0 W/Gh $200.00

ROCKMINER R4-BOX 470 Gh/s 1.0 W/Gh $210.00

ROCKMINER Rocket BOX 450 Gh/s 1.07 W/Gh $599.00

ROCKMINER R-BOX 32 Gh/s 1.41 W/Gh $65.00

ROCKMINER R-BOX 110G 110 Gh/s 1.09 W/Gh $88.00

ROCKMINER T1 800G 800 Gh/s 1.25 W/Gh $325.00

Spondooliestech SP10 Dawson 1400 Gh/s 0.89 W/Gh $2,845.00

SP20 Jackson 1.3-1.7 Th/s 0.65 W/Gh $248.99

Spondooliestech SP30 Yukon 4500 Gh/s 0.67 W/Gh $4,121.00



TerraHash Klondike 16 5 Gh/s 7.11 W/Gh $250.00

TerraHash Klondike 64 18 Gh/s 7.06 W/Gh $900.00

TerraHash DX Mini (full) 90 Gh/s 7.11 W/Gh $6,000.00

TerraHash DX Large (full) 180 Gh/s 7.11 W/Gh $10,500.00

Twinfury 5 Gh/s 0.85 W/Gh $216.00

Avalon USB Nano3 3.6 Gh/s 0.85 W/Gh $55.00

GekkoScience 9.5 Gh/s 0.33 W/Gh $49.97

C. Non-specialized products Due to the rising hashrate of the bitcoin network caused by

the introduction of ASICs to the market, CPU and GPU mining has decreased.

In computing, hardware acceleration is the use of computer hardware to perform some more specialized processors such as GPUs, fixed-function implemented on FPGAs. Due to the rising hashrate of the bitcoin network caused by the introduction of ASICs to the market, CPU and GPU mining Bitcoins has lost competitive value.

Next, is a list regarding the most common non-specialized architectures:

TABLE II. LIST WITH NON-SPECIALIZED FPGA PRODUCTS

FPGA Mhash/s Mhash/J Watts

Butterflylabs Mini Rig 25200 20.16 1,250

KnCMiner Mars 6000 - 500

ZTEX USB-FPGA Module 1.15y 860 - 250

TABLE III. LIST WITH NON-SPECIALIZED INTEL PRODUCTS

INTEL Mhash/s Mhash/J Watts

Xeon Phi 5100 140 - 245

Core i7 3930k 66.6 - 130

Xeon E5-2690 (dual) 66 - 270

X. DEDICATED MINING FACILITIES

A. Data centers Private equity and investment funds are permanently

monitoring for new opportunities to jump in and take a slice of the crypto-currency mining industry. A company called Bitmain Technologies Ltd.[13] said, if the weather holds out, it could complete construction on a colossal (judging from the pictures), 45-building solar-powered data center complex in China’s Xinjiang autonomous region.

Fig. 10. Massive crypto-currency Data Center in China

A 135 MW complex, operating at full capacity, would provide enough power to fuel 159,763 Antminers. With 45 buildings in the complex (which, from the 3D models, looks somewhat like a solar-powered POW camp), that’s about 3,550 Antminers per building.

Each stripped-down Antminer’s awkward 5U form factor should still be enough to seat 8 units in a tray that’s 5U tall. You could conceivably pack 64 Antminers into one rack, and leave room for a 2U power supply. . . if a standard 2U supply could feed them all. A full-size 2U UPS probably delivers no more than 3,200W, for a ratio of one UPS for every three Antminers.

Assuming Bitmain has done its best to optimize each Antminer’s power consumption, it might be able to squeeze eight Ants into a kind of “module.” A full 5U of that module would house the compute units, and you’d need 4U for about 6,400W of power. Each module being 9U tall, you could fit five of them into a 45U rack.

With 3,550 Antminers to distribute throughout each building at 40 per rack, that gives you 89 racks per building. For racks alone, you’d need 2,670 square feet per building, or 120,150 square feet total. That’s not counting the additional space consumption for power distribution, so for safety, let’s round it up to 135,000 square feet. That would give you a power density of about 1 kW/sq. ftIn order to find out Bitcoin mining profitability for investing in facilities to host mining capacity, some points require previous analysis.

The most relevant parameters such as electricity cost, the cost of hardware and other variables, give an estimate of projected profit:

Hash Rate – A Hash is the mathematical problem the miner’s computer needs to solve. The Hash Rate is the rate at which these problems are being solved. The more miners that join the Bitcoin network, the higher the network Hash Rate is.

The Hash Rate can also refer to your miner’s performance. Today Bitcoin miners (those super powerful computers talked about in the video) come with different Hash Rates. Miners’ performance is measured in MH/s (Mega hash per second), GH/s (Giga hash zper second), TH/s (Terra hash per second) and even PH/s (Peta hash per second).

Bitcoins per Block – Each time a mathematical problem is solved, a constant amount of Bitcoins are created. The number of Bitcoins generated per block starts at 50 and is halved every 210,000 blocks (about four years). The current number of Bitcoins awarded per block is 25. However soon enough the block halving will occur and the reward will be downgraded to only 12.5 Bitcoins.

Bitcoin Difficulty – Since the Bitcoin network is designed to produce a constant amount of Bitcoins every 10 minutes, the difficulty of solving the mathematical problems has to increase in order to adjust to the network’s Hash Rate increase. Basically this means that the more miners that join, the harder it gets to actually mine Bitcoins.

Electricity Rate – Operating a Bitcoin miner consumes a lot of electricity. You’ll need to find out your electricity rate in order to calculate profitability. This can usually be found on your monthly electricity bill.

Power consumption – Each miner consumes a different amount of energy. Make sure to find out the exact power consumption of your miner before calculating profitability. This can be found easily with a quick search on the Internet or through this list. Power consumption is measured is Watts.

Pool fees – In order to mine you’ll need to join a mining pool. A mining pool is a group of miners that join together in order to mine more effectively. The platform that brings them together is called a mining pool and it deducts some sort of a fee in order to maintain its operations. Once the pool manages to mine Bitcoins the profits are divided between the pool members depending on how much work each miner has done (i.e. their miner’s hash rate).

Time Frame – When calculating if Bitcoin mining is profitable you’ll have to define a time frame to relate to. Since the more time you mine, the more Bitcoins you’ll earn.

Profitability decline per year – This is probably the most important and illusive variable of them all. The idea is that since no one can actually predict the rate of miners joining the network no one can also predict how difficult it will be to mine in 6 weeks, 6 months or 6 years from now. This is one of the two reasons no one will ever be able to answer you once and for all “is Bitcoin mining profitable ?”. The second reason is the conversion rate. In the case below, you can inset an annual profitability decline factor that will help you estimate the growing difficulty.

Conversion rate – Since no one knows what the BTC/USD exchange rate will be in the future it’s hard to predict if Bitcoin mining will be profitable. If you’re into mining in order to accumulate Bitcoins only then this doesn’t need to bother you. But if you are planning to convert these Bitcoins in the future to any other currency this factor will have a major impact of course.

B. Cloud For those not interested in operating the actual hardware then they can purchase Bitcoin cloud mining contracts. There have been a tremendous amount of Bitcoin cloud mining scams. Hashflare: offers SHA-256 mining contracts for $1.20/10 GH/s. More profitable SHA-256 coins can be mined while automatic payouts are still in BTC. Customers must purchase at least 10 GH/s. Genesis Mining: is the largest Bitcoin and script cloud mining provider. GM offers three Bitcoin cloud mining plans: 100 GH/s ($26/Lifetime Contract), 2,000 GH/s ($499/Lifetime Contract), and 10,000 GH/s ($2,400/Lifetime Contract). These plans cost $0.26, $0.25, and $0.24 per GH/s, respectively. Zcash mining contracts are $29 for 0.1 H/s $280 for 1 H/s, $2,600 for 10 H/s

Minex: is an innovative aggregator of blockchain projects presented in an economic simulation game format. Users purchase Cloudpacks which can then be used to build an index from pre-picked sets of cloud mining farms, lotteries, casinos, real-world markets and much more. Minergate: Offers both pool and merged mining and cloud mining services for Bitcoin. Hashnest: is operated by Bitmain, the producer of the Antminer line of Bitcoin miners. HashNest currently has over 600 Antminer S7s for rent. You can view the most up-to-date pricing and availability on Hashnest's website. At the time of writing one Antminer S7's hash rate can be rented for $1,200. Bitcoin Cloud Mining: Currently all Bitcoin Cloud Mining contracts are sold out. NiceHash: is unique in that it uses an orderbook to match mining contract buyers and sellers. Check its website for up-to-date prices. Eobot: Start cloud mining Bitcoin with as little as $10. Eobot claims customers can break even in 14 months. MineOnCloud: currently has about 35 TH/s of mining equipment for rent in the cloud. Some miners available for rent include AntMiner S4s and S5s.

ACKNOWLEDGMENT Blockchain technologies represent a fundamentally new

way to transact business. They usher in a hugely scalable, robust, and smart next generation of applications for the registry and exchange of physical, virtual, tangible, and intangible assets. Thanks to the key concepts of cryptographic security, decentralized consensus, and a shared public ledger (with its properly controlled and permissioned visibility), blockchain technologies can profoundly change the way we organize our economic, social, political, and scientific activities.

So, what will the Bitcoin world future look like? If new security improvements continue to be added, the question of "where do you store your funds?" will end; instead, the question will be: "what are the withdrawal conditions of this account, and what is the policy of each key?".

Consumer wallets will all be 2-of-3 multisig, sharing the keys between either a low-security local-storage key, a high-security key in a safety deposit box and a central provider, or two central providers and a low-security key.

In the long term, the Bitcoin multisig wallet story gets even more interesting once cryptocurrency 2.0 technologies go into full tilt. Next-generation smart contract platforms allow users to set arbitrary withdrawal conditions on accounts; for example, one can have an account with the rule that one out of a given five parties can withdraw up to 1% per day, and three out of five parties can withdraw anything.

One can make a will by setting up a account so that one's son can withdraw any amount, but with a six-month delay where the account owner can claw the funds back if they are still alive. In these cases, multi signature transaction wallets oracles will play an even larger role in the cryptocurrency world, and may even fuse together with private arbitration companies; whether it's a consumer-merchant dispute, an employment contract or protecting a user from the theft of his own keys, it's ultimately all a matter of using algorithmic and human judgement to decide whether or not to sign a bitcoin multisig transaction with a Bitcoin multisig wallet.

Regarding the open possibilities of becoming a miner, doing so with a regular computer is possible. As an example, for a regular Mac Book Pro with an i7-4770k CPU

At full power, around 24MMCs per day are possible to obtain, which correspond to around $5-6, if the machine runs at full power.

Mid power ( 4 cores instead of 8 ) which allows you to work on the PC without even feeling a miner is on, will give you half of that.

The most profitable coin/miner pair avaiable today is MemoryCoin/M7k yamMiner.

One more option you can consider is mining Altcoins instead of Bitcions. Today there are hundreds of Altcoins available on the market and some of them are still real easy to mine. The problem is that because there are so many Altcoins it’s hard to tell which ones are worth investing your time in. Some good examples for Altcoins are Litecoin, Dogecoin and Peercoin.

In order to understand which Altcoins are profitable you can find website indexes such as CoinChoose[14] that give you a complete Altcoin breakdown. On CoinChoose you can see the difficulty for each Altocoin, where can you exchange them and what are the chances to profit Bitcoins by mining each specific Altcoin

In the long run you could make a profit from Bitcoin mining but only if you invest a considerable amount of money in a good mining rig (e.g. Antminer s9) or take your time to “hack” through making a profit with CEX.IO. I’d currently stay away from Altcoins but that’s my own personal opinion. If you don’t have the time or the money – stay away from mining and just invest in buying Bitcoins for the long run.

REFERENCES

These are the references used to build this work: [1] Andy Greenberg (20 April 2011). "Crypto Currency". Forbes.com.

Retrieved 8 August 2014. [2] "All you need to know about Bitcoin". timesofindia-economictimes. [3] Bitcoin-block-signing History, http://blockchain.info, 2 November 2016 [4] This is Huge: Gold 2.0 - Can code and competition build a better

Bitcoin?, New Bitcoin World, 26 May 2013 [5] "coinmarketcap.com". Retrieved 13 November 2016 [6] http://econpapers.repec.org/paper/netwpaper/1417.htm. Retrieved 13

November 2016

[7] 2016 Annual Report, https://www.treasury.gov/initiatives/fsoc/studies-reports/Pages/2016-Annual-Report.aspx. Retrieved 13 November 2016

[8] "Introducing Ledger, the First Bitcoin-Only Academic Journal", http://motherboard.vice.com/read/introducing-ledger-the-first-bitcoin-only-academic-journal, Motherboard. Retrieved 13 November 2016

[9] https://www.bitcoinarmory.com. Retrieved 13 November 2016 [10] https://bitcointalk.org/index.php?topic=566627.0. Retrieved 13

November 2016. [11] Wary of Bitcoin? A guide to some other cryptocurrencies, ars technica,

May 2013

[12] L. Dadda, M. Macchetti, and J. Owen. The design of a high speed ASIC unit for the hash function SHA-256 (384, 512). In Proceedings of the Design, Automation and Test in Europe Conference and Exhibition Designers’ Forum (DATE), February 2004.

[13] Company Overview of Bitmain Technologies Ltd. http://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=329243116 , 2 November 2016

[14] Coinchoose guide, https://www.coinchoose.com. Retrieved 13 November 2016.