Recap of bitcoin so far: Signing review Encrypt sha256 hash using private key to sign Transactions must be signed to be valid Forming a new block and the bitcoin miner: Block includes a hash value for the block Must be within a specific range Narrower range = more work Change the nonce to change the hash value So it's a lot of work to produce a valid blockchain! This is to prevent an attacker from producing one Mining reward: Special transaction written into the block 6.25 BTC currently (~$130,000) Also receive the transaction fees for the block Otherwise, maybe nobody would bother As it is, lots of work goes into the blockchain Expectation is that eventually transaction fees will be enough Mining: Basically, we guess a bunch of potential nonce values The mining pool delivers a range to try The miner tries them, and reports the results Right away if one works! "golden nonce" Pool rewards are allocated according to number of nonces tried The old days: Just use a regular computer That worked for a while Difficulty adjusts for a target time of 10 minutes per block Block reward halving (last in May 2020, next in 2024 Electrical efficiency But what if electricity is free, or somebody else is paying? malware mining Next: GPU mining Some coins can still be mined this way, but not bitcoin Lots of ethereum was mined this way until last Fall Still profitable for some coins A GPU is a lot more flexible Even more efficient: Application-Specific Integrated Circuits ASIC only performs one hash function A bitcoin miner can't mine all coins asicminervalue.com and efficiency, different hash functions My miner does sha256, and that's it This is where bitcoin is at now, and that's what I brought ASIC value, electricity use, and payoff time Will it pay off before the difficulty gets too high? Or before the next halving? Expect profitability to fall off over time Let's look at GPU mining too whattomine.com Note: Most ASIC miners require 220v How much power will it use? watts: a rate, how fast we're using power watt-hours: A quantity, how much power we used About 10 cents per 1000 watt-hours, or 1 KW/h So a 2,000 watt miner would be about 20 cents/hour to run What if you were going to use that power anyway? To heat your house or something A miner is just as efficient as resistance heating! Not as efficient as a heat pump Heating with gas is cheaper than electricity What if somebody: Doesn't want to use a mining pool? Tries to "steal" a golden nonce? Decides to cheat by including a different reward transaction? Calculates a golden nonce at the same time as somebody else? Finds a closed-form calculation for a golden nonce? Has lots of solar panels, or a fusion reactor or something?