Quiz 5 - Bitcoin Mining

Bitcoin depends on miners to:
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Bitcoin depends on miners to:
•Store and broadcast the block chain
•Validate new transactions
•Vote (hash power) on consensus
What are the 6 steps in mining Bitcoins?
1.Join the network, listen for transactions
a.Validate all proposed transactions
2.Listen for new blocks, maintain block chain
a.When a new block is proposed, validate it
3.Assemble a new valid block
4.Find the nonce to make your block valid
5.Hope everybody accepts your new block
6.Profit!
What is the current mining difficulty (end of 2015)?
2^68 =84,758,978,290,086,040,000
Is everyone solving the same puzzle?
No!
Unlikely miners working on the same set of transactions (and thus the same block)
Even if some miners have the same transactions in the block, there is one which is not the same.
Q1: Do you know which one?
Q2: Why?
Answer 1: Coinbase!
Answer 2: Miners will specify their own address in the output (hopefully each miner will use a different address!)
How to set the MINING DIFFICULTY?
Every two weeks (or approx. 2,016 blocks):

next_difficulty= previous_difficulty *
(2 weeks)/(time to mine last 2016 blocks)



*Expected number of blocks in 2 weeks at 10 minutes/block
Factor(s) affecting mining difficulty:
•How many new miners join the network <--- current exchange rate of Bitcoins
•Efficiency of mining hardware
Q. Which of the following are true about Bitcoin miners?

a. The target hash has become so small that the block header nonce alone isn't generally large enough to allow miners so search enough of the hash output space to find a valid block

b. Bitcoin miners can more efficiently mine for blocks by specifically targeting parts of the nonce search space that have more puzzle solutions

c. Over a 2 week period, the average time to mine a block is always 10 minutes

d. The mining difficulty is recomputed roughly every 2 weeks to keep the proof-of-work puzzle difficult
a. The target hash has become so small that the block header nonce alone isn't generally large enough to allow miners so search enough of the hash output space to find a valid block - correct;

d. The mining difficulty is recomputed roughly every 2 weeks to keep the proof-of-work puzzle difficult - correct;
SHA-256
•General purpose hash function
•Part of SHA-2 family: SHA-224,SHA-384,SHA-512
•Published in 2001
•Designed by the NSA
•Remains unbroken cryptographically
•Weaknesses known
•SHA-3 (replacement) under standardization
CPU mining
Throughput on a high-end PC ≈ 20 million hashes/sec

≈ 139,461 years to find a block today!
GPU mining•GPUs designed for high-performance graphics •High parallelism •High throughput •First used for Bitcoin mining in October 2010 •Implemented in OpenCL •OpenCL: General purpose high level language for implementing non-graphic applications on GPUsGPU mining advantages•Easily available, easy to set up •Parallel ALUs --> Simultaneous SHA-256 computations •Some GPUs support instructions for bit-wise operations --> Useful for SHA-256 computations •Can drive many from 1 CPU •Can overclock! --> Only downside is that overclocking might introduce errors (but errors can be quickly verified) or overheat --> Introduction of some errors to gain a speed-up in hash computation is a good trade-offGPU mining disadvantages•Poor utilization of hardware --> Contains FPUs which are not used for SHA-256 at all •Poor cooling -->Cannot be stacked •Large power draw •Few boards to hold multiple GPUs --> May need customized boards Throughput on a good card = 20-200 MHz --> 173 years to find a block w/100 cards --> GPU mining is basically dead for BitcoinsGoodput*some errors are okay (may miss a valid block) Goodput: throughput × success rate Worth over-clocking by 50% with 30% errors!FPGA mining•Field Programmable Gate Area •First used for Bitcoin mining approx. June 2011 •Implemented in VerilogFPGA mining advantages•Higher performance than GPUs -->Excellent performance on bitwise operations •Better cooling •Extensive customisation, optimisationFPGA mining disadvantages•Higher power draw than GPUs designed for -->Frequent malfunctions, errors •Poor optimization of 32-bit adds -->Critical for SHA-256 operations •Less accessible -->Cannot buy them at regular stores -->Fewer hobbyists with sufficient expertise to program them •More expensive than GPUs •Marginal performance/cost advantage over GPUs *Throughput on a good card = 100-1000 MHz ≈ 1 billion hashes / sec 25 years to find a block w/100 boards (at 2015 difficuly level)! FPGA mining is also dead for BitcoinsBitcoin ASICs•Special purpose -->Approaching known limits on feature sizes -->Less than 10x performance improvement expected •Designed to be run constantly for life •Require significant expertise, long lead-times •Perhaps the fastest chip development ever!Q. Which statement about Bitcoin miners is NOT true? a. If the global hash rate doubles every two months, a new piece of hardware that a miner buys will find most of the blocks that it ever will mine in the first six months of operation b. Bitcoin miners can recoup a reasonable fraction of their initial expenses by selling their ASICs once they are done with them to other users for less computationally intense purposes. - True c. Many miners will consider the climate of an area when setting up mine operations because of the cost of cooling their equipment d. Mining Bitcoin on a modern CPU will yield negligible mining rewardsb. Bitcoin miners can recoup a reasonable fraction of their initial expenses by selling their ASICs once they are done with them to other users for less computationally intense purposes. - TrueMarket dynamics (2013/2014)•Most boards obsolete within 3-6 months -->Half of profits made in first 6 weeks •Shipping delays are devastating to customers •Most companies require pre-orders •Most individual customers should have lost...Professional mining centersNeeds: •Cheap power •Good network •Cool climateLandauer's principle (Thermodynamic limits):Any non-reversible computation must consume a minimum amount of energy. Specifically, each bit changed requires (kT ln 2) joulesIs SHA-256 reversible?NOIs Energy consumption inevitable?YESWhat is embodied energy (Energy aspects of Bitcoin mining)?•used to manufacture mining chips & other equipment •Should decrease over time •Returns to scaleWhat is Electricity (Energy aspects of Bitcoin mining)?•used to perform computation •Should decrease over time, but will never disappear! •Returns to scaleWhat is cooling (Energy aspects of Bitcoin mining)?•required to protect equipment •Costs more with increased scale!Estimating energy usage: top-down•Each block worth approximately US$6,500 •Approximately $11/s generated •Industrial electricity (US): $0.03/MJ •Equivalently, $0.10/kWh If Bitcoin miners were spending all $11 per second of earnings on buying electricityUpper bound on electricity consumed:367 MJ/s = 367 MWEstimating energy usage: bottom-up•Best claimed efficiency: •Most cutting edge ASIC - 3 gigahashes/sec per watt (or 3 billion hashes per second for 1 watt of power consumed) •Network hash rate: 350,000,000 gigahashes/sec •Excludes cooling and embodied energyLower bound on electricity consumed (to produce that many hashes per second at that efficiency):150 MWIn summary - Bitcoin energy usage•The entire Bitcoin network consumes roughly 10% of a large power plant's output •Significant but still small compared to other usages of electricity•Why not install mining rigs as home heaters (Data furnaces)?•Ownership/maintenance model •Gas heaters still at least 10x more efficient •What happens in summer?Q1. Which of the following are assumptions made about the UPPER bound for the energy used for mining Bitcoins? a. Everyone mines where it is cold (cooling doesn't consume energy) b. Everyone mines at the maximum claimed efficiency c. Miners mine up to the point that all of the money they earn is used to pay for electricity d. The energy efficiency of mining hardware decreases with age e. Miners all pay the same for electricityc. Miners mine up to the point that all of the money they earn is used to pay for electricity - true; e. Miners all pay the same for electricity - true;Q2. Which of the following are assumptions made about the LOWER bound for the energy used for mining Bitcoins? a. Everyone mines where it is cold (cooling doesn't consume energy) b. Everyone mines at the maximum claimed efficiency c. Miners mine up to the point that all of the money they earn is used to pay for electricity d. The energy efficiency of mining hardware decreases with agea. Everyone mines where it is cold (cooling doesn't consume energy) - true; b. Everyone mines at the maximum claimed efficiency - true;