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I have this doubt regarding bitcoin mining, assuming I have two miners of hashpower 500 H/s .

  1. Can I add up my hashpower and make it work like a single processor of 1000H/s OR
  2. Both both miners would be acting independently?

According to what I have read, option 1 is how it takes place.

  1. So this means a mining pool has combined power of all the associated miners and working on one block? OR
  2. All miner are working on different block of their own ??

According to what I have learnt, option 3 is how it takes place.

Now, referring to the attached chart by blockchain.info and assuming option 1 & 3 for the questions Only top 3-4 mining pools should be making profit. Relatively other miners have a very low probability with available hashpower to mine a block. And say for profit if all the miners decide to join big mining pools, eventually the network will become centralized.

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Mining is a lottery, not a race.

The fastest miner doesn't always win. In general, if you have X% of the hashrate, you will find X% of the blocks.

This is because not just all pools, but every every, every chip, ... is attempting to solve a different block proposal. Every attempt has an independent chance of winning. There are an infinite number of potentially valid blocks, but they're still only a tiny fraction of all possible blocks. Everyone is not trying to find the next block - they're trying to find a next block.

So:

  1. Can I add up my hashpower and make it work like a single processor of 1000H/s

Yes. You can't distinguish the different processors - more hashpower just tries more block proposals at the same time.

  1. Both both miners would be acting independently?

Yes. Everything always acts independently.

  1. So this means a mining pool has combined power of all the associated miners and working on one block?

Yes.

  1. All miner are working on different block of their own ??

Yes.

  • Thanks @peter, I recall you answered my similar question earlier as well, but still I am not able to digest it completely. You said yes to question 3 & 4 both, so what happens out of these two? 1. A mining pool with total hashpower of y H/s makes a block, sends hash to miners for computation and computes nounce with y H/s. 2. A mining pool asks miner to provide block hash and nounce clearing the current difficulty according to their ledger, and all miner computes nounce with power of whatever fraction they hold of total y H/s. – Piyush Chittara Oct 18 '17 at 15:37
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    (simplified) Each pool gives each miner a separate range of possible block variations to try. As soon as one of them finds a solution, they notify the pool. As a result, a pool with 2 hashers will go through possibilities twice as fast, and have twice as much chance to find a solution first. – Pieter Wuille Oct 18 '17 at 15:51
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    Perhaps your confusion comes from the fact that there is no block until a solution is found. It's not that the pool gives out a block X to miner A and a block Y to miner B. It gives a range of a trillion blocks proposals to try to A, and another trillion to B. – Pieter Wuille Oct 18 '17 at 15:53
  • thanks @peter, it has made things more clear. But still, it's hard to imagine pools with <1% hashpower to make profit. They have the same chance towards the answer I understand but winning lottery against 99% hashpower seems highly unlikely :p , anyways considering their relatively low investment kind of makes up for the possible profit value. – Piyush Chittara Oct 18 '17 at 19:49
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    Exactly. With 1% of the hash rate they will find 1% of the blocks. However, they also only needed to invest in 1% of the hardware and electricity. So assuming hardware and electricity are equally priced, this just translates to a fixed BTC income per hw/elec spending. – Pieter Wuille Oct 19 '17 at 3:57

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