39

if in the coming years the difficulty increases so much that mining is no longer profitable That's not really possible. The mining power is set so that the miners need 10 minutes in average to mine a block. If 50% of the miners would disappear because it's not profitable any more, the difficulty would decrease so that it's profitable again. Can the ...


25

There's a factor called Difficulty, the more hashing power exists on the network the more difficulty exists, therefore it's harder to mine coins. Right now The difficulty factor would let you recover your money fast because almost no one has ASIC chips, when they ship in bulk the difficulty factor will rise to 30-120 million during the year. To know by how ...


22

The explanations on the web are all very vague and mystical, on purpose maybe. Here is my take in simple words, just reading the megacoin source code from the above comment. The goal is to have a more adaptive way of adjusting the difficulty instead of just averaging the last 2016 blocks like bitcoin. This is needed because of multipools which might switch ...


20

Difficulty is basically a different representation of the target to make it easier for normal humans to understand it. Difficulty represents how difficult the current target makes it to find a block, relative to how difficult it would be at the highest possible target (highest target=lowest difficulty). The current difficulty of 6,695,826 means that at a ...


18

The target section of the block header is called nBits in the code. nBits is a 32-bit compact encoding of a 256-bit target threshold. It works like scientific notation, except that it uses base-256 instead of base-10. For example, if nBits is equal to 0x181b8330, you would calculate it like this: Or, more simply, you'd use the same shorthand you use with ...


16

Meni's answer is good. I just want to give some practical detail method about difficulty calculation, perhaps helpful for future views of this question's answer. Let's take a look at Satoshi's genesis block header (part of related info): $ bitcoin-cli getblockhash 0 000000000019d6689c085ae165831e934ff763ae46a2a6c172b3f1b60a8ce26f $ bitcoin-cli ...


16

(If I may repeat myself a bit...) Mining is like having a lot of people throwing weighted coins (such that 1 millionth of the time it comes up heads) and telling you when they hit a heads. If one such "heads" is reported every 10 minutes (600 seconds), you can make a very accurate estimation of how many times per second the coins are being flipped. In this ...


15

How to calculate the target from bits Let's start with a block-header, always 80-bytes that looks like this: 04000000b9e2784a84e5d2468cee60ad14e08d0fee5dda49a37148040000000000000000e9dd2b13157508891880ef68729a1e5ecdde58062ebfa214a89f0141e5a4717faefd2b577627061880564bec From the 80-bytes, the bits are actually the 72nd to 76th byte: ...


14

Difficulty is simply the ratio between the max target and the current target. It's easier to speak in terms of difficulty than in terms of the target. The max target is defined as (2^16 - 1) * 2^208 or approximately 2^224. Since there are 2^256 different values a hash can take, a random hash has a chance of about 2^(-32) to be lower than the max target. It ...


13

Not if you don't have one already. The trouble is that you don't know when you'll receive your device and, as @user3418 says, the difficulty will be rising in the meantime. Butterfly Labs (who manufactures the device you're talking about) has only just started delivering devices, and already has a large number of pre-orders. You probably wouldn't receive ...


13

A supercomputer is way slower than mining with ASICs. A supercomputer only has much CPU power, not even GPU power and ASICs are way more powerfull than GPUs. ASICs represent the hashing algorithm as hardware which means they can't do anything else, that's why they are so fast. At http://bitcoinwatch.com/ you can see the current network hashrate in PetaFLOPS,...


13

A hash is 256 bits long, so there are 2^256 possible hashes in the hash space. But if you assert that the hash has to begin with a 0, that halves the number of hashes that are allowed (and thus doubles the average number of hashes you need to test), and if you say it must start with two 0's, that's now only quarter of the hash space that is valid. The ...


11

I'm not sure it was. When the network started operating (and Satoshi was pretty much the only one mining), blocks weren't found every 10 minutes. For example, the first 2016 blocks were found in 24 days rather than 2 weeks. Normally this would cause the target to go up but it can't go above the hardcoded max target, so only in block 32256 in December 30 2009 ...


11

Because blocks were not being mined in less than 10 minutes on average during this time (so the difficulty would only decrease and not increase), and the difficulty cannot go lower than 1.


10

Mining is a self-adjusting system. The difficulty only rises in accordance to the available mining power. Hence, it can neither go to a difficulty where it will take months for a block to be found, nor can it become prohibitely expensive to mine. Also see How is difficulty calculated?.


10

They aren't really necessary. The reason that they are included can only be known by Satoshi, and AFAIK, he did not state why he chose to include nBits in the block header (or many other things that are just arbitrary). This is one of the many things that Satoshi chose to do and no one really knows why. It remains in the block header today because removing ...


9

The simple answer: no. The not to simple answer: extremely unlikely. Miners hash an input block, in the hopes of getting a result that satisfies the difficulty requirement, i.e., has a certain number of zeroes in front. Now the possibilities for the miner to vary the input are quite large. There is the 4 byte nonce, there is the order transactions are put ...


9

The Bitcoin reward schedule follows a predetermined pattern, see Controlled supply from the Bitcoin wiki. The next reward drop will happen at block number 420000. The current block number at the time of writing this answer is 318662. There are about 101338 blocks remaining. At approximately 10 minutes per block, there are approximately 1008 blocks per week, ...


9

You're presenting it as a choice between either allowing miners to choose the difficulty, or having it be implied by previous history. In fact, neither is true. The target is determined by history (for the reasons you bring up), and the target stored inside the block header has to match the value determined by history. At this point, there is no good ...


9

17 judging by the latest blocks published on blockchain.info: https://blockchain.info/block/0000000000000000057fcc708cf0130d95e27c5819203e9f967ac56e4df598ee


8

ASICminer did decide to keep the hardware and mine. They're selling shares with intent to payout the dividends from whatever profit is made. However, Avalon and BFL didn't choose the same path. As to why, some people believe it's far better to "sell the shovel" than "dig for gold". No one knows what the exchange rate or mining difficulty will be in 3 months ...


8

To understand this we should first explain that a block with a high difficulty, let's say D, is also a share of low difficulty d < D, therefore if we find such a block for difficulty D we automatically have a block of difficulty d. This also means that if I as a miner am looking for a share with difficulty d I might by chance find a block of difficulty D (...


8

TL;DR. Bitcoin profitability is about choosing between buying BTC outright (Coinbase, or Bitstamp) or buying hardware ASIC miners and paying the ongoing electrical fees. Edit: To keep mining expenses low, you will need the cheapest form of electricity. This usually means coal in most regions. "Clean coal" doesn't exist. 10 years from now is a long time, ...


8

No, there is no consensus until the next block is found. The network is experiencing a blockchain-fork. It will only mend once one of the tips pulls ahead by adding another block. Then all nodes will reorganize to the longest chain and consensus is reestablished. The losing chain becomes an extinct branch – valid but not part of the longest chain. There can'...


8

Testnet has a built in functionality that changes the difficulty to 1 if the mining process takes 20 minutes or longer. This question explains the dropping of difficulty to 1. So while the difficulty is 1, the blocks are being formed rapidly until the difficulty reaches to a value which takes 10 minutes.


8

TL;DR The formula comes from turning an algorithm into a mathematical formula. nBits encodes the target with the first bytes as the size of the final target, followed by the 3 most significant bytes of that target. This can be converted into that crazy formula. The formula is the mathematical representation of the actual algorithm that was used for the ...


7

If the current difficulty is D, then the target hash (the value below which block hashes must go) is: 0x00000000FFFF0000000000000000000000000000000000000000000000000000 / D (by definition of difficulty, which is a fraction of the maximum target), or otherwise put, the number of valid hashes is: 65535 * 2208 / D Which means that the ratio of all ...


7

This rule is to prevent people from unintentionally spending Bitcoins that they wind up not owning. For any Bitcoins other than the block reward, unless you intentionally double spend, a reorganization leaves your transactions valid. So they can just be included in the new blocks. (Assuming they don't spend the proceeds of a double spend.) However, if ...


7

The mining difficulty is going up very fast. You are correct. But the mining industry is also stimulating the Bitcoin economy significantly. See this news story, for instance: KnCminer sells $3M of bitcoin mining equipment in 4 days My best answer to your chart is another chart: From: https://blockchain.info/charts/miners-revenue Even with the bitcoin ...


7

No, the SHA2 hashing function is not vulnerable to any known attack that significantly reduces the difficulty of finding a block, but it is a highly random process. Randomness is funny sometimes. Statistically it it works out to be even over a longer time period or larger population, but if you focus in on a small set of samples sometimes you see a cluster ...


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