Mining and miners are the foundation for the majority of decentralised blockchains. Miners, performing calculations, constantly solve a huge number of complex mathematical problems, thereby checking the correctness of transactions and packing them into blocks. In fact, they are arbitrators, who make sure that all network participants comply with the rules established in it. In order to solve the ciphers, some sort of computing equipment is used — video cards or specialised devices, such as ASIC miners.
What is network complexity, who controls it and why is it needed
Each cryptocurrency network has a certain complexity. This parameter indicates the amount of calculations that must be done in order to find a new block and receive a reward for it. Thus, knowing the complexity of the network, the power of the equipment and its energy consumption, miners get the opportunity to roughly calculate the profitability of the mining process. With that parameter, they can select the devices that are most suitable for work in the selected network.
The complexity of a decentralised network varies depending on the quantity and the power of the equipment connected to it. The popularity of the coin generates demand, with the growth of which its price also increases. As a result, mining profitability increases, which attracts new miners. A decrease in the popularity of the currency and a decrease in its price leads to an outflow of miners and a decrease in complexity.
To simulate the process of gold mining, the creator of the first cryptocurrency set a certain period of time for which miners must find a new block. It was done in order to unquestioningly follow the plan of the emission of new coins, otherwise the asset may depreciate. For a bitcoin network, for example, the average time of finding one block should be ten minutes. Recalculation of the complexity of the task assigned to the miners occurs after finding every 2016 blocks. If they find the block faster than 10 minutes, the complexity of the network increases and vice versa.
Hashrate equipment and network
The word “hashrate” comes from the two English words “hash” and “rate”. Everything is clear with the word “rate”, which means “speed”. Hash is the result of information encryption, a set of characters of a certain length. Different networks use different encryption algorithms and the appearance of the hash in them will be different. At the moment, computing devices made for mining have a specific algorithm. At the same time, working on another network will either give less performance, or will be completely impossible.
Conversion any amount of information into hash is very fast, and the reverse process is impossible. This is very important, otherwise the operation of the entire blockchain will be ineffective. If you change only one character in the source data, the set of characters in the output will also be different. It means that each data set will have its own unique hash.
Bitcoin blockchain is based on the SHA-256 algorithm. In order to add a new block, miners need to find a block header value that will be less than or equal to a 256-bit sequence. To find the desired value, miners change the value of one of the parameters called “nonce”. The chances of finding the right number the first time are negligible, in most cases nonce has to be changed a huge number of times. Hence the name of the consensus algorithm — Proof-of-Work, or proof of work.
Hash-rate is a unit of measure for the power of computing equipment or a blockchain network. In the case of equipment, this parameter shows the number of combinations that a miner or video card can go through in one second. Currently, units of measure per second are used, such as hash, kilohesh, megahesh, gigahesh, terahesh, petahesh and exache. Each subsequent one is equal to 1000 previous ones — for example, in one kilo hash equals 1000 hashes per second.
The network hash-rate shows the total capacity of all the equipment currently working in it. In the fall of 2019, this parameter in the Bitcoin network was in the range from 80 to 100 EH/s.
How the growth of the network hash affects the mining profitability
The hash-rates of popular cryptocurrency networks are growing. At the very beginning of the cryptocurrencies development, it was possible to mine only using the central processor of your computer. With the growing popularity of cryptocurrencies, new companies, producing specialised devices — miners have appeared. As a result, the complexity of the bitcoin network has increased significantly and it is already impractical to mine bitcoins having even a whole farm with video cards.
The equipment race is in full swing — manufacturers are releasing new, more expensive devices with a higher hash-rate. Miners upgrade their equipment to increase profits, while increasing the complexity of the network. This has led to the fact that mining is already controlled by very large and wealthy companies, mainly located in China.
In order for currency production to remain profitable, the coin rate must be above a certain value. Otherwise, to make a profit, you will have to buy even more productive miners or switch to mining altcoins. For an approximate calculation of the generated profit, special calculators are used that take into account the hash of the equipment and (sometimes) the cost of a kilowatt of electricity.
Is it possible to increase the hash-rate of equipment
Overclocking farms consisting of video cards is usually done using special software. To squeeze a larger hashrate, the factory default frequencies of GPU and video memory are increased. The purpose of the process is to find the maximum possible values at which the farm would work in a stable mode.
It is worth remembering that an increase in hashrate in this way leads to side effects in the form of increased power consumption and heat transfer. As a result, not only does the bill for light increase, but the need to install a more advanced cooling system arises.
The operation of cards at the peak of their abilities causes an increase in equipment wear and its breaking down. It can be cost-effective if the plans include upgrading the farm with the resale of old equipment.
For safe acceleration, ASIC miners use special firmware. Depending on the type of cooling used, you can significantly increase the hash of the device. The air version traditionally less advantageous than the immersion one, when miners are immersed in a special coolant that effectively removes heat from the device.
Buying, servicing and replacing equipment is a complex, expensive, and risky business. Instead of that, you can rent a hash rate from one of the cloud services. The main disadvantage of this approach is its lack of transparency. As a rule, clients are not informed about the parameters of the leased equipment and its location is not specified. How have miners been serviced and by whom and in what condition are they, one can only guess. It means that it’s almost impossible to calculate even approximate profits and you have to take the service’s word for it.