Bitcoin mining explained to an advanced audience, in black-and-white. :) A presentation held at Bitcoin Startups meet-up Berlin, 6 May 2014

1. Mining demystified

2. Heavy tools

3. gigahash

4. terahash

5. petahash

6. 1
PH
=
b50f642411733cd63264d3bedc046a5364ff3c77d2b37ca298ad8f1b5a9f05ba
x
1 000 000 000 000 000
(1 quadrillion)
~
58 000
TB
each second
!

7. 1
PH
=
b50f642411733cd63264d3bedc046a5364ff3c77d2b37ca298ad8f1b5a9f05ba
x
1 000 000 000 000 000
(1 quadrillion)
~
58 000
TB
each second
!
Current Bitcoin network hash rate: ~50 PH/s

8. Y U NEED SO MANY HASHES?

9. Mining:
creation of new bitcoins and
distributing transactions

10. Idea: Make it really hard to mine

11. hard mine

12. mine hard

13. mine hard
Get it? :)

14. Hard to do, easy to verify

15. Proof of work

16. A new block roughly every 10 minutes

17. New block references previous block

18. Forming a ...?

19. Forming a block chain

20. “Side effect”: adding new bitcoins

21. 25 bitcoins reward per block

22. ~7700 EUR every 10 minutes

23. ~400m EUR per year

24. Reward halves every
210,000 blocks = 4 years

25. Next halving:
~ 21 August 2016

26. How mining works

27. Cryptographic function called
“double SHA-256”

28. Secure Hash Algorithm

29. Invented by NSA

30. OMG!

31. Nothing to fear,
all math, all open source

32. 256 bits “digest size”
(length of resulting hash)

33. “hello”
first round of SHA-256:
2cf24dba5fb0a30e26e83b2ac5b9e29e1b161e5c1fa7425e73043362938b9824
second round of SHA-256:
9595c9df90075148eb06860365df33584b75bff782a510c6cd4883a419833d50

34. Hash length of 64 characters:
32 hex octets with 8 bits each = 256 bits

35. Sort of a checksum

36. Virtually impossible to reverse

37. First step to mine a new block:
Collecting new transactions

38. Second step:
Hashing of block header

39. If hash starts with enough zeros,
you found a block

40. 000000000000000024aed4ca327f8957bb5f112787ff5350971a3fe38c144f14
Bingo!

41. If not, increment “nonce” or other values in
block header and try again

42. A quadrillion times!

44. Enough zeros?

45. Currently 17:
00000000000000000

46. Determined by “difficulty”,
adjusted ~ every 2 weeks

47. Pooled mining

48. Share work with other miners

49. Pool participants send partial work
to earn shares

50. For example all hashes
with 12 leading zeros

51. Compensation according to share

52. If a block was found,
new work is being sent out

53. Pool communication protocols:
Stratum, Getwork, Getblocktemplate

54. Stratum used by most pools

55. Stratum uses JSON-RPC
JavaScript Object Notation
Remote Procedure Call

56. Human-readable (sort of):
{"id": 1, "method": "mining.subscribe", "params": []}

57. To be continued...

58. Thanks for listening!
@meinharrd
meinhard@benn.org
benn.org

59. Presentation held at
Bitcoin Startups Meet-up Berlin
6 May 2014
CC-BY-NC 2014 Meinhard Benn