Lecture 2 - Mining

Question 1

Why do we need blockchain?

Answer 1

To prevent double spending

–> have an ordered list of all transactions; public

Question 2

What is a sybil attack?

Answer 2

A Sybil Attack refers to when a system is violated by an entity that controls two or more different identities in a network.
–> Voting does not work

Question 3

How do we solve the Sybil problem?

Answer 3

Make people pay for each vote. –> Proof of Work

Question 4

polynomial time

Answer 4

An algorithm is polynomial (has polynomial running time) if for some 𝑘,𝐶>0, its running time on inputs of size 𝑛 is at most 𝐶𝑛𝑘. Equivalently, an algorithm is polynomial if for some 𝑘>0, its running time on inputs of size 𝑛 is 𝑂(𝑛𝑘). This includes linear, quadratic, cubic and more. On the other hand, algorithms with exponential running times are not polynomial.

Question 5

What are the assumptions of a fair coin issuance?

Answer 5

• Start with zero coins in the system
• reward voters with freshly generated coins for supporting the network
• reduce issuance over time to approach a fixed maximum (period halvings)

Question 6

current estimated total hashrate

Answer 6

213 EH/s

Question 7

How often is the difficulty adjusted?

Answer 7

Every 2016 blocks

Question 8

How do we calculate the new difficulty?

Answer 8

New difficulty = current difficulty / (time taken for last 2016 blocks / 2 weeks)

Question 9

Could quantum computers find valid block hashes easily?

Answer 9

No. Because Bitcoin uses two SHA-256 sequentially.

Question 10

Could a quantum computer crack Bitcoin wallets and steal the coins?

Answer 10

• Very old addresses (P2PK) use the plain public key so they are attackable via Shor’s algorithm.
• Other addresses that have never been used to send funds: addresses are themselves hashes and since breaking a hash is not feasible they are safe.
• Any addresses that have send any number of coins in the past: Sending coins requires to sign a transaction. This exposes the private key, so we are vulnerable to Shor

Question 11

Shor’s algorithm

Answer 11

can factor large numbers in O(log(n)) instead of O(n)

Question 12

Grover’s algorithm

Answer 12

can crack hashes O(sqrt(n)) instead of O(n)

Question 13

What to do against quantum attacks?

Answer 13

Never reuse Bitcoin addresses.

Question 14

What are mining pools?

Answer 14

Miners construct blocks at a lower difficulty and submit those as proof of work. When one miner actually finds a block, the hashrate statistics of all miners on the pool are used to calculate fair payouts.

Question 15

Pros of a mining pool

Answer 15

• miners get consistent rewards

- miners don’t need to run a node

Question 16

Cons of a mining pool

Answer 16

• pools must be trusted with the fair distribution of coins

- miners can’t choose which transactions they are mining

Question 17

Largest mining pool companies?

Answer 17

Foundry USA,
F2Pool
AntPool

Question 18

Best mining farm builds

Answer 18

Custom, Immersion

• -> medium to low operating expenses overhead
• -> high stability
• -> high temperature ranges work

Question 19

Power supply comparison Data Center vs. Mining Farm

Answer 19

• data centers always have redundant power

- mining farms never have backup power since downtimes are not so important

Question 20

Cooling in data centers vs. mining farms

Answer 20

• data centers need to guarantee that servers can run inside their rated environment. Active cooling is necessary
• mining farms use direct air cooling using outside air. Innovation in Immersion cooling

Active cooling is a heat-reducing mechanism that is typically implemented in electronic devices and indoor buildings to ensure proper heat transfer and circulation from within.

Unlike its counterpart passive cooling, active cooling is entirely dependent on energy consumption in order to operate. It uses various mechanical systems that consume energy to dissipate heat. It is commonly implemented in systems that are unable to maintain their temperature through passive means.

Question 21

What is immersion cooling?

Answer 21

Immersion cooling is an IT cooling practice by which IT components and other electronics, including complete servers and storage devices,[1] are submerged in a thermally conductive but electrically insulating dielectric liquid or coolant. Heat is removed from the system by circulating relatively cold liquid into direct contact with hot components, then circulating the now heated liquid through cool heat exchangers. Unlike many other applications, water cooling cannot be used as normal water is electrically conductive and will break electronic components.

Question 22

Networking in DC vs mining farms

Answer 22

DC: Complex firewall, glass fibre

mining farm: Low bandwidth requirements

Question 23

Security in DC vs mining farms

Answer 23

DC: high
mining: low only perimiter

Question 24

Calculating electricity usage

Answer 24

hashrate * efficiency = power 
hashrate is 213 EH/s
average efficiency = 57 J/TH = 57 MJ/EH
--> 213 EH/s * 57 MJ/EH = 12141 MJ/s = 12.1 GW
.2% of global electricity usage

Question 25

What growth can we still achieve?

Answer 25

26% growth until spring 2024.

Equilibrium is at about 15.32 GW

Question 26

CO2 impact by source

Answer 26

around 25% gas, 35% coal, rest renewables.

Annual CO2 emissions are 44Mt –> around .08% of global emissions.

Question 27

Are renewables cheaper than fossil fuels for bitcoin mining?

Answer 27

Yes because mining is done is sparsely populated areas

–> Miners participate in various load management plans worldwide to provide flexibility as a service.

Question 28

when is a block valid?

Answer 28

When it’s hash is smaller than 2^224/difficulty

Question 29

new difficulty =?

Answer 29

current difficulty / (time for last 2016 blocks / 2 weeks)

Question 30

ASIC 110nm vs ASIC 3cm

Answer 30

1000 J/TH

15 J/TH

Question 31

Miner hardware currently

Answer 31

66% Bitmain

Question 32

power =

Answer 32

hashrate * efficiency

Question 33

When is mining equilibrium reached?

Answer 33

when total costs approach total revenue.