Cryptocurrencies have been all the rage in the past few years, and it is all thanks to 1 currency: Bitcoin. Bitcoin is the biggest cryptocurrency in the world, but it isn’t the only one. Joining it at the top is Ether. Under those currencies, there are many more. This part will focus on the different currencies, the different consensus methods, and the hardware that exists to mine.
What are the biggest cryptocurrencies?
Right now, the top 10 cryptocurrencies are(in this order): Bitcoin, Ether, XRP, Tether, Bitcoin Cash, Litecoin, EOS, BinanceCoin, Bitcoin SV, and Tezos, from highest market cap to lowest. In total, there are over 5000 cryptocurrencies with a total market cap of over $200 billion being traded.
Bitcoin, possibly the most famous cryptocurrency, was mined on January 3rd, 2009. Before that, in 2008, a person or group of people that went by the name Satoshi Nakamoto published a paper outlining what Bitcoin was and what it could do. He mined the first block, which gave him 50 bitcoins. However, it would take a long time for these 50 bitcoins to be worth something. In February 2011, it finally reached a value of 1 USD. After years of rises and drops, it hit its peak of almost $20 000 USD. It promptly fell, until it rose again to almost $11 000 USD in July of this year.
What are the different types of consensus methods?
Cryptocurrencies aren’t all the same. They have different values, different coding languages, and different ways of mining it. Bitcoin uses Proof of Work, while Ethereum 2.0 will use Proof of Stake. I’ll talk about what they are, which one is better, as well as talk about some not as widespread methods.
Proof of Work is when your computer has to calculate a mathematical puzzle to mine a block. These puzzles vary in difficulty. Bitcoin takes the average time of the last 2016 blocks, and changes the difficulty so the next 2016 blocks will take around 10 minutes. This is so if someone has a very powerful GPU, they can’t do the puzzles quickly. However, this also made it so having a powerful GPU is needed to compete with the other miners. This makes it hard for regular people to mine a cryptocurrency as widespread as Bitcoin.
Proof of Stake is when the network chooses who gets to mine or validate a transaction based on how much coins they have. More coins equals a higher chance of being able to mine, which results in even more coins. It’s like a lottery system. If you buy more tickets, you have a higher chance to win the jackpot, which in this case, is the coin prize.
By reading these descriptions, you can probably see some obvious flaws. Proof of Work will require miners to purchase expensive equipment, often worth more than what each coin is worth, to compete with the other miners. If I wanted to mine Bitcoin with my computer right now, I probably wouldn’t get a single coin. There are buildings dedicated to just Bitcoin mining, with tens of thousands of dollars of equipment used to mine. But, lets take a step back. Bitcoin isn’t the only currency using Proof of Work. Let’s say there was a smaller cryptocurrency that isn’t as widespread as Bitcoin. 1 person with powerful hardware could come in and mine that currency. This would make it so nobody else would be able to mine it, giving that one person most of the currency. Proof of Stake also has its own problems, too. Probably the first one that comes to mind is that you have a higher chance of getting coins if you have more coins. So, if one person has more coins than the other person, the gap between them will just grow bigger and bigger. This also could allow one person to disrupt the network, just like in Proof of Work. One person could invest thousands of dollars into coins and then get most of the coins in the future too. Proof of Work and Proof of Stake aren’t the only consensus methods. There are other methods that were made specifically to tackle some of these problem.
One of these is a modified version of Proof of Stake, called Delegated Proof of Stake. This allows people to vote for and elect delegates, who they think are the most trustworthy. Those delegates then validate transactions, getting a reward. The delegates take turns, but if 1 delegate fails to be on time, they can be removed, and replaced with a new delegate. But where is the stake part in this? Well, each voter has a different amount of votes depending on how many coins they have. So, if I have more coins than you, then I have more votes than you. The voters, also called stakeholders, can delegate their votes to another person, allowing the other person to vote for them. Some networks also require the delegates to stake some of their money and take it away if they misbehave or otherwise damage the network. Delegated Proof of Stake is better than Proof of Work or Proof of Stake because anybody can become a delegate, allowing for more decentralization. Big buildings with thousands of dollars of hardware aren’t any better than some random person with a laptop. However, a rich person with a lot of coins can still massively influence a vote. Another consensus method can solve this problem.
Proof of Authority is a consensus method where the network gives a few people the power to validate transactions. Since there are only a few people validating transactions, it can run very fast, and there isn’t any expensive equipment needed. It can also scale up with little to no difference in speed. However, this all comes with a sacrifice: more centralization. The point of a blockchain was to be decentralized, where everyone has an equal amount of power, and nobody can abuse it. Proof of Authority is the opposite. Only a select few people have power and they can abuse it as much as they want. For example, let’s say 1 person wants to send money to someone else but the people with the authority don’t like both of them. They can stop the transaction. The two people can’t do anything about it. They have no power.
What hardware is there to mine different cryptocurrencies?
Cryptocurrencies can be mined using CPUs, GPUs, FPGAs, and ASICs. Bitcoin mining hardware is measured in megahashes/sec. The hash rate is how many calculations it can make. A higher hash rate means more calculations, which means a higher chance of mining a block. You probably know what CPUs and GPUs are, but not the other 2. A CPU would usually provide 10 MH/sec. A GPU could provide 600 MH/sec. CPUs and GPUs used to be good for mining, but are now a thing of the past. FPGAs(Field Programmable Gate Arrays) could provide faster mining for less power than a GPU. They can be bought for around $500. It is faster than a GPU, but not that much faster. 826 MH/sec for 80 watts of power compared to a GPU’s 600 MH/sec for 400 watts of power is a lot better. ASICs (Application-Specific Integrated Circuit) are much, much faster. If you thought 826 megahashes/second was a lot, you’re in for a surprise. An AntMiner S9 (A really good ASIC) provide 14 000 000 MH/sec. 14 million. However, it’s a bit expensive, with a price tag of over $1200. The hash rates obviously change depending on what type of hardware you have, but this is just a basic comparison.
Wow. You’ve made it this far. Now you know about the biggest cryptocurrencies, different consensus methods of cryptocurrencies, and why you probably can’t compete in mining Proof of Work cryptocurrencies. Hopefully you’ve learned something. See you next time!
