Today we have a breathtaking news for you. Right now we are launching our own coin. As you well know, BSOD won’t recommend scam, that’s why our coin will have an absolutely real use-case — educational.
We’ll look into fundamental elements of mining using this coin’s blockchain.
Taking into consideration that mining is a relatively new industry, there is a whole lot of people in it who don’t really understand some important nuances of mining, like mining XVG, DGB or GIN.
That’s what we want to talk about.
So, let’s start.
In order to vividly explain the basics of mining Verge, DigiByte or Gincoin let’s “digitize” BSOD COIN network:
• Total network speed of BSOD COIN network — 100 Terahash/sec;
• Block target — 60 seconds;
• Block reward — 10 coins.
For now that’s all we need.
The network is supported by a few mining pools:
• Pool bsod.pw has 30% of the network;
• Pool Beta has 20% of the network;
• Pool Gamma has 10% of the network.
Remaining 40% is spread throughout a numerous smaller pools.
We also have a miner called Peter who is hashing at 3 Th/s and miner called Maria hashing at 3 Gh/s.
Let’s try and calculate the profit of Peter and Maria when mining on different pools.
In order to do this, we need to know what does percent of the network affect.
If pool bsod.pw has 30% of the network — it means that there is a high probability that 30% of blocks will be found on this pool.
If we digitize that using our network specs — for 100 minutes of mining on that pool around 30 blocks could be found. Which in turn will yield miners 300 coins (10 coins × 30 blocks).
Continuing to digitize everything.
Let’s say Peter and Maria are mining on this pool, contributing to solving received work, how much coins will they get for this?
As we have said, Peter has 3 Th/s, and when he’s mining on a pool with 30% of network hash, it means that his share% on the pool is 10%. According to this, Peter should earn 10% from overall pool earnings which equals 30 coins.
Now let’s calculate Maria’s profit for the same time period.
Maria has 3 Gigahash or 0.003% from network hash. Mining on pool bsod.pw her share% should be around 0.01% (0.003% from total network hash on a pool with 30% of hash becomes 0.01%).
According to this, Maria earns (300 × 0.01) = 3 coins.
Now back to our Peter.
As we remember, pool with 30% of hash with a high probability will find 30% of blocks on the network. This is true for Peter as well — with his 3 Th with a high probability he will find 3% of blocks if he will mine it without other miner’s support — solo.
And digitizing again:
For 100 minutes 3% of power with a high probability chance can find 3 blocks. 3 blocks = 30 coins.
Let’s get back to Maria. As Peter has left pool, overall pool hashing power on which Maria is mining has decreased to 27% (30% - 3%).
Considering that Maria’s hashing power is still 3 Gh/s — her share weight on a pool has increased and is now 0.01111111%
27% = 27 blocks = 270 coins (for 100 minutes)
So for 100 minutes of mining Maria gets
(270 coins × 0.01111111 share% on pool) = 3 coins.
Magic? No, maths!
Returning to our “whale” Peter. While we were writing about Maria, you must have been thinking why did Peter left to solo mine if he’s getting the same profit as mining on a pool?
And now we’re adding an additional variable called “luck”.
It’s time to talk about how the blocks are distributed between pools/miners. They aren’t. First come — first served. That’s why we wrote “possibly” and “with a high probability”. Considering that he’ll receive all coins from a found block, even +1 block it’s 40 coins for 100 minutes, so a 25% increase in profit. When mining on a pool this kind of increase is highly improbable. It has a downside though — it’s possible that Peter can find less than 3 blocks, but we believe in “good” luck, don’t we? (:
At this moment the most expressive miners probably rushed to switch their GTX 1060 to solo. After completing untrivial math calculations Maria as well decided to solo mine with her 0.003% of the network, hoping for good luck. As calculations suggested, she should get 1 block in 33 334 minutes or 23 day.
And that’s where greed and dreaminess can cloud a judgement. “What if in these 23 day I can find not one, but 2 or even 3 blocks?!!”, happily rubbing her hands Maria thought, “This is the Golden Grail!”.
This method of narration is used so you could understand that the character
is wrong. I think you already got it (:. But let’s think who was wrong there — Maria or a mining calculator?
And you got it right — they were both wrong.
A remark about “luck”. The main issue of mining with low hashing power percentage is the increase of dispersion. In reality luck can be calculated by deviation from standard value. With 30% of the network this value is significantly lower than with 3%. Because of this even big miners prefer to mine on pools in order to decrease dependency on uncontrollable factors and average out their profit.
In this article I want to avoid explaining what exactly is mining and blockchain — let’s leave that to further articles or self-education. In addition to this, it’s important to know what exactly is a block in a blockchain and I will to explain it in the most simple terms.
Block is a file containing some sort of information (most often — list of transactions for a certain amount of time) and this is what miners are looking for — hash of the current block. Hash of the current block is calculated by brute forcing random numbers with a several variables, one of which — hash of the previous block (otherwise it wouldn’t be a blockchain, would it?). To make the process harder network sets a certain rules for the next block. This is known as network difficulty.
This parameter hasn’t been taken into account by Maria when calculating. Though let’s not be too hard on her for that. Many miners make this mistake when using profitability calculators. The big disadvantage in using them is that they can’t predict changes in difficulty. But let’s not get ahead of ourselves.
Up to this moment in this article we have been reviewing “blockchain in a nutshell” — absolutely static system. But as we well know blockchain is always in motion. Let’s sa Peter forgot to to pay his internet bill and there goes 3% of the network. If owners of pool Beta and Gamma forgot to do that — a third of power goes missing. On the other hand, should John McAfee post on Twitter that he has sold a kidney just to buy a bit of BSOD COIN — instantly price pumps up in turn increasing network hashrate.
So, let’s get back to one of the questions asked in the beginning of the article: “what is the key parameter in coin blockchain specifications?”. The correct answer is the number of blocks, generated in certain amount of time. For example, Bitcoin network has the following values: 2016 blocks for 2 weeks which equals roughly 10 minutes for a block.
Back to BSOD COIN. From coin specifications we can gather that a block must be generated every minute. It means that combined hashing power of connected miners should be enough to find a block that corresponds to this rules. Respectively, if the network hashrate decreases from 100 Th/s to
67 Th/s — the block time will increase 33%. Or decrease 100% with the hashrate increase from 100 Th/s to 200 Th/s.
The time has come to explain in simple terms what does hash difficulty mean. Let’s say at launch network sets a rule — every hash should start with a zero. This rule works while pool admins can calculate hashes in their mind. But with a sudden hashrate increase solutions are found instantly. Blockchain sees that blocktime is actually just a few seconds instead of targeted 1 minute. That’s when difficulty increases — now block hash must start with two leading zeroes.
So if the actual block time is shorter than target — the number of zeroes increases. If the actual time is longer than the target — the number of zeroes decreases.
We still remember Maria who wants to solo mine a block for 70 days? Now our readers can with good authority help her and recommend mining on bsod.pw pool getting a stable income. It’s much better than risk profit on a long run because of changing network hashrate and difficulty. Let’s also not forget about dispersion when mining with low network share percent.
Now, when we have made in-depth review about difference of pool mining and solo mining as well as other network parameters — it’s time to talk about shares and their difficulty.
Share is a possible solution which miner sends to the network. In other words — every share is a potential block. Every share has a difficulty variable. Share difficulty is a configurable variable and in simple terms is just “which solutions should I send to a pool”.
Let’s say network difficulty is as valid block hash should contain 6 zeroes at the start. Easy shares — hashes with less than 1 zero. Hard shares — at least 3 zeroes. But only a share with 6 zeros is block. So pool knows beforehand that these shares cost nothing but still accepts them.
So why are we sending shares to a pool if they are not a block? It’s simple: judging by the difficulty of your shares and how often you send them pool determines your speed (contribution to finding a new block)
So, let’s try to figure out how does calculating shares works on pool and in solo mining.
Maria sends her shares on a pool, but as we remember, her power to find a block is pretty small. But when someone else mining on the same pool finds
a hash that matches a block — all miners get a part of a reward, proportionally to the job done. Apart from amount of sent shares, their difficulty holds a significant value. In other words, 20 easy shares on their contribution holds the same weight as 10 shares with x2 difficulty, but at the same time they are lighter on the pool (less spam). When mining on a pool it’s important to find a right balance between share difficulty and their count, so that shares would hit every block found on pool and in turn miner would get
a reward for participating in every block.
Meanwhile Peter is still mining solo so he can be focused on maximum difficulty shares, as any way he only gets paid when he himself find a right difficulty hash himself. That’s why his mining strategy would be just hashing and only rarely send shares to a pool so that pool would know that Peter’s ISP didn’t turn off his internet and continue to send new jobs.