Proof Of Stake Mining Ethereum
Proof Of Work Vs Proof Of Stake: Basic Mining Guide
Proof of Work vs Proof of Stake: Basic Mining Guide Angel Investors, Startups & Blockchain developers... Recently you might have heard about the idea to move from an Ethereum consensus based on the Proof of Work (PoW) system to one based on the so-called Proof of Stake. In this article, I will explain to you the main differences between Proof of Work vs Proof of Stake and I will provide you a definition of mining, or the process new digital currencies are released through the network. Also, what will change regarding mining techniques if the Ethereum community decides to do the transition from work to stake? This article wants to be a basic guide to understanding the problem above. First of all, lets start with basic definitions. Proof of work is a protocol that has the main goal of deterring cyber-attacks such as a distributed denial-of-service attack (DDoS) which has the purpose of exhausting the resources of a computer system by sending multiple fake requests. The Proof of work concept existed even before bitcoin , but Satoshi Nakamoto applied this technique to his/her we still dont know who Nakamoto really is digital currency revolutionizing the way traditional transactions are set. In fact, PoW idea was originally published by Cynthia Dwork and Moni Naor back in 1993, but the term proof of work was coined by Markus Jakobsson and Ari Juels in a document published in 1999. But, returning to date, Proof of work is maybe the biggest idea behind the Nakamotos Bitcoin white paper published back in 2008 because it allows trustless and distributed consensus. Whats trustless and distributed consensus? A trustless and distributed consensus system means that if you want to send and/or receive money from someone you dont need to trust in third-party services. When you use tra Continue reading >>
It Is No Longer Worth It To Build An Ethereum Mining Rig
It Is No Longer Worth It To Build An Ethereum Mining Rig Building an Ethereum mining rig hasnt been worth it for months, and soon they will be completely obsolete. Goodnight, sweet prince. Image: Daniel Oberhaus/Motherboard Back in May I wrote a guide explaining how to build an Ethereum mining rig , a special type of computer that forms the backbone of the Ethereum network and earns ether, the digital currency native to the network, for its owner. Shortly thereafter, Motherboard also made a video documenting this process . Since then, Ive received countless emails from readers inquiring about my mining rig. Ive received three such emails this week. The most common question voiced by these readers is whether or not it is still worth it to build a mining rig. The answer to this question is no. Building an Ethereum mining rig hasnt been worth it for months and a few months from now, mining ether will be completely obsolete. Read More: An Idiot's Guide to Building an Ethereum Mining Rig Arguably, building an Ethereum mining rig wasnt even worth it when I built my machine in May, and many readers let me know this when the article and video first came out. This is somewhat true, but there is a necessary caveat here. Mining ether also wasnt worth it for about the first year and a half of the cryptocurrencys existence. The price of ether hovered around $10 from 2015 until early 2017, when it saw a spike to $25. This was important because it meant the value of the ether being mined was higher than the cost of the electricity that was needed to mine it. In other words, until that point small scale mines were operating at a loss in the belief that the tokens they were mining would someday be worth a lot more money. In hindsight, these early miners were rightthe price of ether has Continue reading >>
Ethereum Switches To Proof Of Stake
Recently, we posted a brief overview of the Ethereum ICO craze . Before that, we had reviewed how blockchains work in general. Today, well delve deeper into the process of mining . In this article, well introduce briefly the concepts of Proof of Work (PoW) and Proof of Stake (PoS). Well talk about why Ethereum, the second largest blockchain, is planning to switch the former for the later and share some forecasts as to the outcomes this decision might lead to. Among his many breakthrough accomplishments, Satoshi, the mysterious founder of Bitcoin, is praised for coming up with a solution to whats known as Byzantine Generals Problem. Suppose theres a war. Theres an army that has a city encircled, but due to exhaustion of resources, the armys generals are undecided whether its smarter to attack or to retreat. Suppose, also, that its the 15th century and the commanders, who are all in camps far apart, have no way of communicating effectively save for sending messengers. How could these generals (lets say there are 20 of them) reach a consensus? Obviously, theyll have to vote. If the majority (at least 51%) decides to move forward with a strategy (of attacking, or of retreating), the whole army will have to get behind their choice. Thats only fair and logical. But then theyll face another problem: how to ensure that no general involved in making a decision votes the wrong way on purpose, just to confuse things? Well, in the world of blockchains, the generals are miners. And choosing a war strategy for them is agreeing on a set of rules, a certain view of the history of digital events that are posted on the network. The way that Bitcoin enables reaching a distributed consensus and punishes, or rather discourages, bad actors for acting dishonestly is by using the Proof of Wor Continue reading >>
Beginner's Guide To Ethereum Casper Hardfork: What You Need To Know
The Casper updates mission is straightforward, then: to shift ether from being a PoW coin to a Proof-of-Stake (PoS) coin . As opposed to the PoW consensus protocol, the PoS protocol achieves consensus through stakerssometimes referred to as minters, toowho stake their coins by locking them down in specialized wallets . With these stakers at work, mining will become redundant, meaning the Ethereum network post-Casper will rely on stakers and staking pools instead of miners for its operability. And, like miners, stakers will be rewarded for their service to the network. Minters will receive an annual dividend of ether (collected from network fees), so staking would be a lucrative endeavor for those with enough coins. Naturally, then, the more ETH you stake, the larger your annual dividends will be. For now, Ethereums developers havent arrived at a hard number for the amount of ETH that will be required to stake. What they have confirmed, though, is that the number will likely start out higher before gradually being brought considerably lower. For instance, Ethereum founder Vitalik Buterin has recently thrown around a guesstimate of needing approximately 1,000 ETH to be one of the networks inaugural stakers. He said that number could be dropped down to as low as 10 ETH over time. Whatever the number ends up being, users will still be able to band together and create staking pools, just like there are robust mining pools in the Bitcoin and Ethereum communities today. Youll simply pitch your desired amount of ether in, lock in down with your peers, and rake in the dividends together (to be shared proportionally, of course). Well, the Casper update is certainly a team effort, but its inarguable that top Ethereum researcher Vlad Zamfir has been at the vanguard of the updates Continue reading >>
What Does Pos Mean For Ethereum Mining, And If I Build A Mining Rig, How Will It Affect Me?
What does POS mean for Ethereum mining, and if I build a mining rig, how will it affect me? A2A. Proof of Stake essentially means, the probability for a node to mine a transaction (block) is directly proportional to the Stake the node (e.g. amount of Ether it previously mined) has in the network. Unlike BitCoin where every block gives a fair chance to all the nodes in the network (barring network latency), PoS requires the nodes to prove their stake in the network. Though the idea is fairly simple, the possibilities of a node hedging its bets across multiple possibilities that it always ends up gaining out of all transactions makes it challenging to adopt. There are some nice solutions that Ethereum proposes to overcome this. However, similar to PoW there is no mathematical proof for the hardness of these schemes. In a nutshell, PoS will make it less meaningful to have mining farms. Instead buy a rack in a co-lo and dedicate it to the p2p network. Which is completely in line with Ethereum philosophy of building a World Computer unlike BTC. Continue reading >>
How Ethereum's Casper Protocol Will Address Problems With Proof Of Stake
How Ethereum's Casper Protocol Will Address Problems With Proof Of Stake Bitcoin and Ethereum both currently operate under a Proof of Work protocol. Ethereum is moving from Proof of Work towards Proof of Stake under its new Casper protocol. Despite its many benefits, the drawbacks of Proof of Stake have prevented its widespread adoption. Casper aims to solve Proof of Stake's drawbacks, resulting in an improvement over existing Proof of Work and Proof of Stake protocols. The updated protocol improves the long term outlook of Ethereum's valuation. An overarching problem that cryptocurrencies must address is called the Byzantine General's Problem . The Byzantine General's Problem essentially simplifies down to: How do you prevent data from being corrupted or falsified in a network where there are nodes that have economic incentive to lie about the data? In application to cryptocurrency, the problem boils down to preventing attackers from lying about a coin's ledger, given the economic incentive of doing so. We need a way to form consensus on the ledger because anyone can create a block, while we only want a unique chain, so we want a way to decide which block to trust. The two main schools of thought to solving the Byzantine General's Problem are Proof of Work (PoW) and Proof of Stake (PoS). Explicitly, a "proof of work" is a piece of data which is difficult (costly, time-consuming) to produce but easy for others to verify and which satisfies certain requirements. Producing a proof of work can be a random process with low probability so that a lot of trial and error is required on average before a valid proof of work is generated. Currently Bitcoin, Ethereum, and the vast majority of other cryptocurrencies utilize some form of proof of work. PoW (referring to the protocol Continue reading >>
Proof Of Stake Faq Ethereum/wiki Wiki Github
See A Proof of Stake Design Philosophy for a more long-form argument. No need to consume large quantities of electricity in order to secure a blockchain (eg. it's estimated that both Bitcoin and Ethereum burn over $1 million worth of electricity and hardware costs per day as part of their consensus mechanism). Because of the lack of high electricity consumption, there is not as much need to issue as many new coins in order to motivate participants to keep participating in the network. It may theoretically even be possible to have negative net issuance, where a portion of transaction fees is "burned" and so the supply goes down over time. Proof of stake opens the door to a wider array of techniques that use game-theoretic mechanism design in order to better discourage centralized cartels from forming and, if they do form, from acting in ways that are harmful to the network (eg. like selfish mining in proof of work). Reduced centralization risks, as economies of scale are much less of an issue. $10 million of coins will get you exactly 10 times higher returns than $1 million of coins, without any additional disproportionate gains because at the higher level you can afford better mass-production equipment. Ability to use economic penalties to make various forms of 51% attacks vastly more expensive to carry out than proof of work - to paraphrase Vlad Zamfir, "it's as though your ASIC farm burned down if you participated in a 51% attack". How does proof of stake fit into traditional Byzantine fault tolerance research? There are several fundamental results from Byzantine fault tolerance research that apply to all consensus algorithms, including traditional consensus algorithms like PBFT but also any proof of stake algorithm and, with the appropriate mathematical modeling, pr Continue reading >>
Ethereum's Big Switch: The New Roadmap To Proof-of-stake - Coindesk
Ethereum's Big Switch: The New Roadmap to Proof-of-Stake After years of development, ethereum has a new planto update the algorithm that keeps its entire network in sync. Vitalik Buterin, ethereum's creator , recently released a rough implementation guide that reveals the network's developers will first start with a 'hybrid' system that merges bitcoin-style proof-of-work mining with itsmuch-anticipated and still-experimental proof-of-stake system called Casper, created by Buterin. The planeffectively meansethereum will begin alternating between the two systems, so that some transaction blocks (one out of 100) are secured viaproof-of-stake and the rest remain on proof-of-work. Buterin has notably been working on his implementationin parallel with ethereum developer Vlad Zamfir, "cross-pollinating" their ideas. According toKarl Floersch, blockchain engineer for ethereum startup ConsenSysand a coder working with Buterin on Casper's development, the result is that the network is choosing the more conservative of two potential paths forward. "What Vitalik has come up with is a get-it-out-the-door, working version, that works, but might be less theoretically revolutionary than Vlad's." Because Buterin's implementation of Casper can, he thinks, get to production faster, it will be used in the first stage of ethereum's evolution. If implemented, this would be the first time proof-of-stake would be employed on the live ethereum platform, albeit playing a minor role. It also would a largereal-world test of proof-of-stake, enabling the cryptocurrency community to determine whether the proof algorithm is asuperior one, as proponents have argued. To advocates, the goal of this potentially revolutionary change to proof-of-stake is to reduce the electricityethereum requires to reacha Continue reading >>
Ethereums Proof-of-stake May Be A Profitable Venture For Currentholders
Co-founder & CEO of Apteo: Researching machine learning techniques to improve investing, especially in stocks, options, and soon, crypto. Come join us! Ethereums Proof-of-Stake May Be A Profitable Venture For CurrentHolders In a recent post , I outlined how the use of real-world resources tie cryptocurrencies like Bitcoin and Ether back to real world monetary value. Today, Im going to flip the script and talk about Ethereums plan to eliminate the need for heavy duty computing power, and why that may not be such a bad thing from a financial perspective. If youre familiar with the idea of cryptocurrency mining, you know that in order to keep a blockchain running smoothly, it takes a lot of computing power to verify new transactions. This process, known as mining, is currently used by both Bitcoin and Ethereum to maintain their blockchains. One of the main issues with mining is the vast amount of electricity that it uses. Vitalik Buterin, the creator of Ethereum, has estimated that the amount of electricity needed to mine Bitcoin and Ethereum runs up a $1M daily bill ( ). Another study recently showed that the amount of electricity consumed by the Bitcoin mining network is comparable to the energy used by all of Ireland ( ). If things continue as-is, cryptos are going to be a big problem for the environment. Mining fills a big need providing consensus among network participants regarding the state of the world of historical and current transactions. Because miners solve complicated problems using transaction information and cryptography, what they do is referred to as proof-of-work. There are, however, other methods for getting a group of disparate participants to agree on transactions. The most popular of which is referred to as proof-of-stake. Instead of miners competin Continue reading >>
What Does Proof Of Stake Mean For Ethereum?
What does Proof of Stake mean for Ethereum? One major issue with Ethereum mining is the high consumption of power. Processing transactions costs an ever-increasing amount of electricity which is not only bad from a financial perspective but also bad for the environment. The main concept used in cryptocurrency mining is proof of work (PoW) which means miners get rewarded when they solve puzzles to validate transactions and create new blocks. Though it works and is used by the majority of cryptocurrencies, there is a need for a lot of computing power for new transactions to be verified. According to an approximation done by Vitalik Buterin who is the founder of Ethereum, it uses electricity costing up to $1M daily in order to process daily transactions. Since mining is becoming less financially feasible over time the founder proposed switching to a different concept as an alternative to proof of work called proof of stake. As opposed to proof of work where miners have to solve complicated algorithms to validate a transaction, in proof of stake miners are those that are willing to stake part of their cryptocurrency on the blocks they think should be added to the blockchain. Proof of stake depends on validators economic stake in the network. In a PoS based blockchain, miners who are the validators have their own turn in voting and proposing the next block. The weight of the vote of the validator will depend on their stake in the network which is basically the deposit of cryptocurrency they have. The blockchain will keep a record of validators and those who hold the blockchains base cryptocurrency. If one holds the blockchains base cryptocurrency they can easily become a miner or a validator as all they need to do is to give up their ether into a locked deposit through a sp Continue reading >>
Ethereum Proof Of Stake Explained
So you might have heard that Ethereum is considering changing its distributed consensus system tosomething called proof of stake. Here, we will try to explain what this is as well as how it may affect you. To truly understand proof-of-stake (PoS) it is easier if we also explain the current system being used by Ethereum, and that is proof of work ( Ethereum Mining ). So basically when Ethereum is transferred, miners group that up into a ledger called a block chain and to do this they have to solve a puzzle. In creating this blockchain, a lot of computational power is also used. The amount of reward you get for creating a blockchain is a transaction reward. However, this depends on how much work you ie. how fast you can calculate and solve the puzzle. So this is all going to go away once proof of stake comes along. With proof of stake, you dont actually solve any puzzles. You remove the puzzle solving element from the system and thus change the way the reward is distributed. So instead of proving how fast you can calculate with hashrate, you need to prove how much Ethereum you own. You do this with something called a master node. When you create a master node, you have to lock up a certain amount of Ethereum to prove that you have it and rewards are distributed according to how much proof of stake you have. One can create multiple master nodes with a lot of Ethereum inside and youll earn more through this method. So thats going to be extremely interesting for everyone. Weve seen proof of stake currencies before. Dash is one example where 50% of the rewards is done by mining and the other 50% is done by proof of stake. And there is PIVX which is 100% proof of stake. The advantage ofproof of stake is huge. One benefit is that you no longer have to do the calculations which Continue reading >>
Proof Of Stake (pos)
Proof of Stake (PoS) concept states that a person can mine or validate block transactions according to how many coins he or she holds. This means that the more Bitcoin or altcoin owned by a miner, the more mining power he or she has. The first cryptocurrency to adopt the PoS method was Peercoin . Nxt, Blackcoin, and ShadowCoin soon followed suit. The proof of stake was created as an alternative to the proof of work (PoW), to tackle inherent issues in the latter. When a transaction is initiated, the transaction data is fitted into a block with a maximum capacity of 1 megabyte, and then duplicated across multiple computers or nodes on the network. The nodes are the administrative body of the blockchain and verify the legitimacy of the transactions in each block. To carry out the verification step, the nodes or miners would need to solve a computational puzzle, known as the proof of work problem. The first miner to decrypt each block transaction problem gets rewarded with coin. Once a block of transactions has been verified, it is added to the blockchain, a public transparent ledger. Mining requires a great deal of computing power to run different cryptographic calculations to unlock the computational challenges. The computing power translates into a high amount of electricity and power needed for the proof of work. In 2015, it was estimated that one Bitcoin transaction required the amount of electricity needed to power up 1.57 American households per day. To foot the electricity bill, miners would usually sell their awarded coins for fiat money , which would lead to a downward movement in the price of the cryptocurrency. The proof of stake (PoS) seeks to address this issue by attributing mining power to the proportion of coins held by a miner. This way, instead of utiliz Continue reading >>
Ethereums Switch To Proof Of Stake Better Than Proof Of Work?
By UseTheBitcoin in Cryptocurrency News Guides Home If youre at least interested in the cryptocurrency space, youve probably heard of Ethereum. Its currently the second largest coin by market cap, primarily because so many other tokens run on Ethereum, and partly because the development team is very talented. Either way, this post is about the switch from POW to POS. Well, POW is currently used by most cryptocurrencies including Bitcoin, Ethereum (for now) and Litecoin. If a coin is minable, that means its utilizing a POW system. Miners use their GPUs or ASICs to solve cryptographic hash functions which verify the blockchain. GPUs primarily designed for gaming like the RX 580 are now being employed by miners. Their GPUs are rapidly guessing and checking different solutions to a next to impossible math problem. When they successfully solve the equation, the ledger (blockchain) is updated and the miner receives a block reward in the form of a token and/or transaction fees. This is called Proof-of-Work because miners are doing lots of work in the form of processing mathematical equations with their mining hardware. Without miners, many networks wouldnt exist. Miners pay for electricity in exchange for tokens. What is Proof of Stake and How its different Proof-of-Stake is a bit different. Previously miners proved how fast they could verify the network; now, ETH holders will show how much they own by running something called a master node . When you create a master node, you have to lock up a certain amount of ETH to prove you own it. Rewards are distributed based on how much you have locked away and how long its locked away for. Instead of 1,000 miners verifying the network for example, there might be around 10,000 wallets holding Ethereum through Proof-of-Stake. With POS, Continue reading >>
What To Mine After Ethereums Pos: World's First Bitcoin Mining Pool Adds Zcash Support
What to Mine After Ethereums PoS: World's First Bitcoin Mining Pool Adds Zcash Support The development team behind the anonymous cryptocurrency Zcash revealed that Slush Pool, the worlds first Bitcoin mining pool, has added support for Zcash. Zooko Wilcox, the CEO of Zerocoin Electric Coin Company (ZECC), the development team behind the anonymous cryptocurrency Zcash, revealed that Slush Pool, the worlds first Bitcoin mining pool, added support for Zcash. In a public statement, Slush Pool announced : We have introduced support for Zcash mining today. That is quite a huge step for us, as we have focused solely on Bitcoin and merged mining so far. It took us many months to develop and thoroughly test our Zcash mining system. We have already successfully mined over 20 blocks during the private testing stage and we are hungry for more. In its blog post entitled 5 Reasons to Mine Zcash with Slush Pool, Slush Pool outlined five major reasons why miners should be interested in mining Zcash. One of the reasons listed by the Slush Pool team was Advanced Account Security. In October of 2016, Trezor reaffirmed the importance of Universal Second Factor (U2F) and its advantages over applications such as Googles Authenticator that is built on top of a 2FA implementation called a Time-based One-time password. While the TOTP method utilized by Google and its widely utilized application Google Authenticator is simple to implement, the Trezor development team revealed that it has severe weaknesses and inconveniences. Mostly, the disadvantages of TOTP are related to security issues that may arise due to the lack of back up and the maintenance of backup codes online. Any file, data or server that is connected to the Internet and brought online can be vulnerable to attacks and security bre Continue reading >>
What Does The Proof-of-stake Switch Mean For Us Miners? : Ethermining
According to the Ehter website, they will be switching from proof-of-work to proof-of stake "sometime in 2017". That means at most we have 7 months of current mining left, and likely much less. Does anyone know what effect this will have on mining profitability when they switch? I'm about to build a new 6 gpu miner and now wondering if I shouldn't. Continue reading >>
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