Why decentralization matters in crypto-mining?

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mn read
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Intermediate

Why Decentralization matters in Crypto-mining?

The course of events that led to ProgPow

The question of decentralization is closely related to crypto currency and blockchain as it is one of the main goal of those technologies. However, at different periods of time during the last decade, this vision has been challenged by several actors such as mining hardware provider, mining pools or other entities.

Why decentralization matters in mining?

What is Decentralization?

Decentralization, n. The security assumption that a nineteen-year-old in Hangzhou and someone who is maybe in the UK, and maybe not, have not yet decided to collude with each other.

Vitalik Buterin

Decentralization is one of the main aspects of the blockchain technology and for sure the most important one as it was set by Satoshi Nakamoto, the founder of Bitcoin. It’s not a coincidence that the blockchain technology was created during the 2008/2010 financial crisis during which distrust in the financial institutions was at its peak. The Bitcoin protocol is an answer to the ubiquity of banks and other financial institutions in the everyday life of the people. However, tricky questions arose quickly and came to challenge the very core idea behind this revolution.

One of the biggest potential issue of a proof of work blockchain is the possibility of 51% attacks. Basically, it’s a situation where a stakeholder control more than 51% of the hash power of the blockchain. In this situation, this actor would potentially be able to rewrite the blockchain for his own purpose and could for instance transfer the ownership of a token or double spend some token.

What is double-spending?

This is a type of fraud that is specific to cryptocurrencies, when a crypto asset can be spent more than once. Simply imagine that you make a transaction and send money to a certain address. It would appear on the other party’s wallet and at the same time remain in your own wallet. More than just being an unfair process, it would have bad effects on the value and credibility of the cryptocurrency. That is why Bitcoin protocol had already, in 2009, a system that would prevent double spend frauds. Here’s a graph that sums up how Bitcoin protocol handles the double spend problem. The orignal article can be found here on CoinSutra

The Fear of 51% Attacks.

As security is at the center of all blockchain protocol, it is of tremendous importance that this kind of situation is avoided. The issue of 51% attack became widely known in 2013 when ghash.io became the largest Bitcoin pool and reach 51% of the hashing power of the network several time.

https://www.coindesk.com/bitcoin-mining-detente-ghash-io-51-issue

You also will find below a very interesting article about mining process which date back to 2014 that goes deep into the subject and gives very useful clue to understand what is at stake.

https://blog.ethereum.org/2014/06/19/mining/

Since this period, the situation is precisely monitored by most of the member of the network in order to prevent this situation from happening once again.

Centralization in decentralization

Another widely known issue that challenge decentralized architecture is ASICS mining. As the mining industry evolved, several companies developed dedicated computer to mine cryptocurrencies, starting with Bitcoin in 2013. Those computers, called ASICS for application specific integrated circuits, have a significant advantage against more handwork server. Consequently, ASICS tends to quickly gain considerable market share and completely stifle GPU mining. This is another example of centralization in the world of decentralization, because companies that build ASICS are not very numerous, there are only a few actors in the field.

One such company is Bitmain which at one point had 80% of market share of the Bitcoin ASICS industry. That posed a threat to the integrity of the network because Bitmain remain basically in control of the machine even after it has sold it. At one point, Bitmain was at the center of a scandal because of using the ASICS it has sold to mine for his own purpose with some tricks such as mining a few minutes when the machine is setting up.

Bitmain and decentralization

As you understood, Bitmain is one of the main hardware mining providers in the world and was especially influential from 2015 to 2018. It’s also quite important to note that Bitmain is behind two of the biggest Bitcoin mining pool: BTC.com and Antpool. It’s also important to note that Bitmain was very influential in the creation of Bitcoin Cash by providing huge amount of hash power to support the network. All those facts highlight the influence of Bitmain on the Bitcoin network.

However, its grip has faded recently because of harder competition and strategic choice. Bitmain is facing a dire situation recently that leads Jihan Wu, founder and CEO, to resign.

What is ProgPow?

It’s a proposition (EIP 1057) that will be included in the next hard fork of the Ethereum network called Istanbul. The goal is to make the Ethereum blockchain ASICS resistant. For a year, ASICS miner started disrupting the mining activity on the Ethereum blockchain. The first of those ASICS was the E3 made by… Bitmain!

In order to secure the blockchain and avoid the trap of the Bitcoin network, several people put forward proposition to make the Ethereum network ASICS resistant. This effort leads to ProgPow. It’s a new algorithm that will frame the network, one that will make unusable all the ASICS developed for the Ethereum network. It will also have an impact on the mining capacity of GPU’s but the consequence is difficult to calculate for now. We’ll have to wait for the release on the main net to evaluate precisely the impact. Here is the detail of all the EIP planned in Istanbul.

https://en.ethereum.wiki/roadmap/istanbul

And a very interesting article about ProgPow:

https://medium.com/okex-blog/ethereums-istanbul-upgrade-understanding-progpow-e5837adb9d6b

If you liked this article, please do not hesitate to comment and share it on your favorite social media, it would help us a lot 😉

Julien

Mammoth Hunter

Passionate about blockchain and cryptocurrencies, I created Cruxpool. I sometimes write for this blog!

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Trading tips for miners

0
mn read
Level
Intermediate

A few trading tips for our miners

Hey miners! As Ethereum price is a critical point for you, we decided to give some tools so that you can assess the evolution of the Ethereum price.

Basically crypto-currency are mainly influenced by technical analysis, which is a job on its own. Since the end of the 19th century, generations of traders tried to master these skills with different result. So, you won’t become a professional trader by reading this article but we can provide some information and advice that will help you avoid some trap

Let's start with the basics

First trading tips, keep in mind that the price of all crypto are closely related to Bitcoin price. An in-depth analysis of the evolution of Bitcoin price will give you some clue to anticipate the future of all the crypto market. Remember that like any market there are ups and downs, and this means that you should always be aware of the timeframe you’re analyzing (this could go from 10 years to 10 minutes).

On the other side, when it’s not about a specific period of time, analyzing specific assets can be a winning strategy. Sometimes it could happen that, for a short period of time, some crypto could be in a bearish trend (price goes down) while a specific crypto will outperform the general trend and enter in a bullish trend (price goes up)

In a nutshell, I advise you to first define a global trend and zero in to a specific period of time or assets.

 The trend was negative (to say the least) during most of 2018 but seems to turn positive since December. This is something you should pay attention to.

Printscreen of trading dashboard interface
picture of bullish and bearish market phases

Indicators you should know.

Trading tips #2 include specific tools but since there are endless useful indicators to master, you will have to choose a few depending on your strategy and mindset. Here are two indicators that I consider very handful and important to master.

First, the MACD:

Moving Average Convergence Divergence (MACD) is a trend-following momentum indicator that shows the relationship between two moving averages of a security’s price. […] Moving Average Convergence Divergence indicators can be interpreted in several ways, but the more common methods are crossovers, divergences, and rapid rises/falls.”

Basically, it will help you determine signals to decide when to buy or sell your cryptos based on analysis of moving average. There’s a full article on Investopedia we recommend that you read if you want to know more about MACD.

Second, the RSI

The RSI –relative strength index – is a “momentum indicator that measures the magnitude of recent price changes to evaluate overbought or oversold conditions in the price of a stock or other asset. The RSI is displayed as an oscillator (a line graph that moves between two extremes) and can have a reading from 0 to 100.”

This indicator will assess the soundness of a trend and allow you to determine overbought (above 70) or oversold (below 30) territory. It can also tell you when a trend will change or if a trend is sustainable.

With those two tools coupled with point and figure analysis, you’ll be able to identify patterns in graphics, allow you to act cleverly. All of this should prevent you from buying high and selling low, a very common mistake that every trader tries to avoid but that I see often.

chart explaining RSI indicator

A few comments on buying and selling for our miners.

My trading tip #3 is about your behaviour when it comes to cryptocurrencies. As you don’t buy crypto but produce them, you will mainly try to short the asset. Except if you’re a holder (HODLR) of course, which by the way, another thing I encourage you to be because crypto is the future!

By shorting, I mean sell the asset when indicators signal a corrective trend is on the way. A simple and clear strategy would be to stop there. However, if you want to play, you can use technical analysis to buy the asset on the bottom of a corrective trend to sell it higher. Keep in mind that it’s almost impossible to buy the asset at an all-time low and sell it at an all-time high (either on a short or long period of time).

Let’s give it a shot with a global analysis of Bitcoin price, as Bitcoin is the main asset in the crypto field.

As all of you know, we have experienced a strong corrective trend since December 2017 that seemed to have ended in December 2018. On the 15th of December, we reached a bottom at 3118 $. Since then, the trend turns positive and several resistances have been broken.

April was a very good month! The positive trend accelerated, Bitcoin jumped from 4100 $ to a five-month-high at 5627 $ on the 23th of April, the highest level since Nov 18. We are actually at a crossroads and we’re currently experiencing a so-called golden crossover, a bull cross of the 50 day and 200 day moving averages for the first time since October 2015. The crossover represents a long-term bearish-to-bullish trend change. But the crypto market is what it is, so I advise to stay careful.  

chart explaining golden corssover

Where could we go from here?

Reproducing the pattern of Bitcoin, Ether bottomed out on the 15th of December at 85$ and bounce back since then to reach a five-month-high at 188 $. That’s a 120% increase so Ether has outperformed Bitcoin since December.

If you liked this article, please do not hesitate to comment and share it on your favorite social media, it would help us a lot 😉

Julien

Mammoth Hunter

Passionate about blockchain and cryptocurrencies, I created Cruxpool. I sometimes write for this blog!

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Introducing Cruxpool : Our Ethereum Mining pool is live

0
mn read
Level
Beginner

Introducing Cruxpool: Our Ethereum Mining pool is live

Today is a red-letter day, for Cruxpool is now live. Well actually we’re in our Beta phase but in any case, mining ETH is now possible and we encourage you, future miners, to give us as much feedback as possible so as we could get even better as fast as possible.
Robot and computer with cruxpool mining pool homepage

So, what is Cruxpool all about?

We are an Ethereum mining pool (at least for now we are focused on ETH but multi-coins will eventually be part of our services), which means we maintain a platform that will help miners to fuse their hashrate altogether, and mine some blocks in the Ethereum blockchain.

You may wonder why on earth would we think of creating a mining pool, when there are already people out there that are proposing the same services? Well simply because we believe that we can provide better solutions and deploy more efforts than these pools we are competing with.

We are miners first and foremost, we were there when bitcoin started, we were there when Ethereum appeared, and we have a well-established mining experience.

 After years of mining, we came to think that in order to help cryptocurrencies to go mainstream, mining pools must do at least two things:

  • Help new miners to discover crypto mining and the blockchain environment, through tutorials, how-to guides, pro tips etc. So as to get them to be more confident in their experience, and instead of keeping knowledge for ourselves, share what we know to increase the number of people using Bitcoin, Ether and other coins
  • Provide a professional, convenient and up-to-date environment that will help intermediate and expert miners to make the most of their mining rigs. This is how, for example, we came out with the idea of real-time statistics. We want our miners to be able to monitor everything about their performance.

What features does Cruxpool have compared to other ETH mining pools?

If you’re mining Ethereum somewhere else, you may ask yourself why should you try our mining pool.

First we are based on a PPS+ System, which means that you will get paid for every share your GPU rig provides. Compared to a PPLNS system in which you get the reward when a block is found, we assure a more stable revenue for you by not putting the luck factor on your shoulders. Learn more about our PPS+ system here

Second, we will have at heart to give you the best support possible when needed, via our support platforms such as our discord (not a member yet: click here), our team will be there for you.We aim at being real close to our partners in their journey into the blockchain technology. This support will also translate into loads of tutorials and how-to guides, to help our miners optimizing their experience.

This is the beginning of an adventure that we believe will be successful, so why don’t you join us and start mining right now?

Pssst! We currently have a welcome offer: 0% fees for the first 2 months 😉

Eric

Content Marketing

I take care of digital communications, including this blog, hope you'll like our articles

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