Bitcoin Mining
Technical Definition
Bitcoin mining
Bitcoin mining is intentionally designed to be resource-intensive and difficult so that the number of blocks found each day by miners remains steady. Individual blocks must contain a proof of work to be considered valid. This proof of work is verified by other Bitcoin nodes each time they receive a block. Bitcoin uses the hashcash proof-of-work function.
The primary purpose of mining is to allow Bitcoin nodes to reach a secure, tamper-resistant consensus. Mining is also the mechanism used to introduce Bitcoins into the system: Miners are paid any transaction fees as well as a “subsidy” of newly created coins his both serves the purpose of disseminating new coins in a decentralized manner as well as motivating people to provide security for the system.
Bitcoin mining is so called because it resembles the mining of other commodities: it requires exertion and it slowly makes new currency available at a rate that resembles the rate at which commodities like gold are mined from the ground.
What is Proof of Work?
A proof of work is a piece of data which was difficult (costly, time-consuming) to produce so as to satisfy certain requirements. It must be trivial to check whether data satisfies said requirements.
Producing a proof of work can be a random process with low probability, so that a lot of trial and error is required on average before a valid proof of work is generated. Bitcoin uses the Hashcash proof of work.
What is Bitcoin Mining Difficulty?
The Computationally-Difficult Problem
Bitcoin mining a block is difficult because the SHA-256 hash of a block’s header must be lower than or equal to the target in order for the block to be accepted by the networks
This problem can be simplified for explanation purposes: The hash of a block must start with a certain number of zeros. The probability of calculating a hash that starts with many zeros is very low, therefore many attempts must be made. In order to generate a new hash each round, a nonce is incremented. See Proof of work for more information.
The Bitcoin Network Difficulty Metric
The Bitcoin mining network difficulty is the measure of how difficult it is to find a new block compared to the easiest it can ever be. It is recalculated every 2016 blocks to a value such that the previous 2016 blocks would have been generated in exactly two weeks had everyone been mining at this difficulty. This will yield, on average, one block every ten minutes.
As more miners join, the rate of block creation will go up. As the rate of block generation goes up, the difficulty rises to compensate which will push the rate of block creation back down. Any blocks released by malicious miners that do not meet the required difficulty target will simply be rejected by everyone on the network and thus will be worthless.
The Block Reward
When a block is discovered, the discoverer may award themselves a certain number of bitcoins, which is agreed-upon by everyone in the network. Currently this bounty is 25 bitcoins; this value will halve every 210,000 blocks. See Controlled Currency Supply.
Additionally, the miner is awarded the fees paid by users sending transactions. The fee is an incentive for the miner to include the transaction in their block. In the future, as the number of new bitcoins miners are allowed to create in each block dwindles, the fees will make up a much more important percentage of mining income.
What is a Mining Pool?
Mining pools are groups of cooperating miners who agree to share block rewards in proportion to their contributed mining hash power.
While mining pools are desirable to the average miner as they smooth out rewards and make them more predictable, they unfortunately concentrate power to the mining pool’s owner.
Miners can, however, choose to redirect their hashing power to a different mining pool at anytime.
Pool Concentration in China
Before we get into the best mining pools to join, it’s important to note that most mining pools are in China. Many only have Chinese websites and support. Mining centralization in China is one of Bitcoin’s biggest issues at the moment.
There are about 20 major mining pools. Broken down by the percent of hash power controlled by a pool, and the location of that pool’s company, we estimate that Chinese pools control ~81% of the network hash rate:
China – 81%Czech Republic – 10%Iceland – 2%Japan – 2%Georgia – 2%Russia – 1%
The Biggest Mining Pools
The list below details the biggest Bitcoin mining pools. This is based on info from Blockchain’s pool share chart:
We strongly recommend new miners to join Poolin or Slush Pool.
1. Poolin
Poolin is a public pool which mines about 18% of all blocks. They are based in China, but have a website fully available in English.
2. F2pool
F2Pool is based in China. It mines about 17% of all blocks.
3. BTC.com
BTC.com is a public mining pool that can be joined and mines 15% of all block. We strongly recommend joining Slush Pool or Poolin instead.
4. Antpool
Antpool is a mining pool based in China and owned by BitMain. Antpool mines about 11% of all blocks.
5. ViaBTC
ViaBTC is a somewhat new mining pool that has been around for about one year. It’s targeted towards Chinese miners and mines about 9% of all blocks.
6. 1THash & 58coin
This is a Chinese pool made from two pools: 1THash and 58coin.
7. Slush
Slush Pool was the first mining pool and currently mines about 11% of all blocks. Slush is probably one of the best and most popular mining pools despite not being one of the largest.
8. BTC.top
BTC.top is a private Chinese mining pool and cannot be joined. It mines about 7% of all blocks.
9. Bitfury
Bitfury is a private pool that cannot be joined. Bitfury currently mines about 3.5% of all blocks.
Which Countries Mine the most Bitcoins?
Bitcoin mining tends to gravitate towards countries with cheap electricity. As Bitcoin mining is somewhat centralized, 10-15 mining companies have claimed the vast majority of network hash power. With many of these companies in the same country, only a number of countries mine and export a significant amount of bitcoins.
China
China mines the most bitcoins and therefore ends up “exporting” the most bitcoins. Electricity in China is very cheap and has allowed Chinese Bitcoin miners to gain a very large percentage of Bitcoin’s hash power. It’s rumored that some Chinese power companies point their excess energy towards Bitcoin mining facilities so that no energy goes to waste. China is home to many of the top Bitcoin mining companies: F2Pool, AntPool, BTCC, and BW. It’s estimated that these mining pools own somewhere around 60% of Bitcoins hash power, meaning they mine about 60% of all new bitcoins.
Georgia
Georgia is home to BitFury, one of the largest producers of Bitcoin mining hardware and chips. BitFury currently mines about 15% of all bitcoins.
Other Countries
The countries above mine about 80% of all bitcoins. The rest of the hash power is spread across the rest of the world, often pointed at smaller mining pools like Slush (Czech Republic) and Eligius (US).
Why are Miners Important?
Bitcoin miners are crucial to Bitcoin and its security. Without miners, Bitcoin would be vulnerable and easy to attack.
Get this:
Most Bitcoin users don’t mine. However, miners are responsible for the creation of all new bitcoins and a fascinating part of the Bitcoin ecosystem.
Mining, once done on the average home computer, is now mostly done in large, specialized warehouses with massive amounts of mining hardware. These warehouses usually direct their hashing power towards mining pools. A Mining Pool By the Worlds Biggest ASIC Producer.
Best Bitcoin Wallet
Despite recent controversy, Antpool remains the largest Bitcoin mining pool in terms of its Bitcoin network hash rate. Antpool holds roughly 15% of the total hash rate of all Bitcoin mining pools.
About Antpool
Antpool mined its first block in March 2014, meaning that it emerged roughly four years after the first mining pool; Slushpool.
Antpool is run by Bitmain Technologies Ltd., the world’s largest Bitcoin mining hardware manufacturer, and a large portion of their pool is run on Bitmain’s own mining rigs.
Antpool supports p2pool and stratum mining modes with nodes that are spread all over the world to ensure stability (US, Germany, China etc.).
