Totalitarianism is a form of government and political system that prohibits all opposition parties, outlaws individual opposition to the state and its claims, and exercises an extremely high degree of control and regulation over public and private life.
It is regarded as the most extreme and complete form of authoritarianism.
As a political ideology in itself, totalitarianism is a distinctly modernist phenomenon, and it has very complex historical roots. Philosopher Karl Popper traced its roots to Plato, Georg Wilhelm Friedrich Hegel‘s conception of the state, and the political philosophy of Karl Marx, although Popper’s conception of totalitarianism has been criticized in academia, and remains highly controversial.
“Man has become the master of the world, a master unbound by any links to nature, society, and history.”
In the 20th century, the idea of absolute state power was first developed by Italian Fascists, and concurrently in Germany by a jurist and Nazi academic named Carl Schmitt during the Weimar Republic in the 1920s.
Benito Mussolini, the founder of Italian Fascism, defined fascism as such: “Everything within the state, nothing outside the state, nothing against the state.”
Schmitt used the term Totalstaat (lit. ’Total state’) in his influential 1927 work titled The Concept of the Political, which described the legal basis of an all-powerful state.
Totalitarian regimes are different from other authoritarian regimes, as the latter denotes a state in which the single power holder, usually an individual dictator, a committee, a military junta, or an otherwise small group of political elites, monopolizes political power.
A totalitarian regime may attempt to control virtually all aspects of social life, including the economy, the education system, arts, science, and the private lives and morals of citizens through the use of an elaborate ideology. It can also mobilize the whole population in pursuit of its goals.
Historian Robert Conquest describes a totalitarian state as a state which recognizes no limit on its authority in any sphere of public or private life and extends that authority to whatever length it considers feasible.
Totalitarianism is contrasted with authoritarianism. According to Radu Cinpoes, an authoritarian state is “only concerned with political power, and as long as it is not contested it gives society a certain degree of liberty.”
Cinpoes writes that authoritarianism “does not attempt to change the world and human nature.”
In contrast, Richard Pipes stated that the officially proclaimed ideology “penetrating into the deepest reaches of societal structure, and the totalitarian government seeks to completely control the thoughts and actions of its citizens.”
Carl Joachim Friedrich wrote that “[a] totalist ideology, a party reinforced by a secret police, and monopolistic control of industrial mass society are the three features of totalitarian regimes that distinguish them from other autocracies.”
Rijndael is a family of ciphers with different key and block sizes. For AES, NIST selected three members of the Rijndael family, each with a block size of 128 bits, but three different key lengths: 128, 192 and 256 bits.
The algorithm described by AES is a symmetric-key algorithm, meaning the same key is used for both encrypting and decrypting the data.
In the United States, AES was announced by the NIST as U.S. FIPS PUB 197 (FIPS 197) on November 26, 2001.
This announcement followed a five-year standardization process in which fifteen competing designs were presented and evaluated, before the Rijndael cipher was selected as the most suitable.
AES is included in the ISO/IEC18033-3 standard. AES became effective as a U.S. federal government standard on May 26, 2002, after approval by the U.S. Secretary of Commerce.
AES is available in many different encryption packages, and is the first (and only) publicly accessible cipher approved by the U.S. National Security Agency (NSA) for top secret information when used in an NSA approved cryptographic module.
Andreas M. Antonopoulos (born 1972 in London) is a British-Greek Bitcoin advocate, tech entrepreneur, and author.
He is a host on the Speaking of Bitcoin podcast (formerly called Let’s Talk Bitcoin!) and a teaching fellow for the M.Sc. Digital Currencies at the University of Nicosia.
Antonopoulos was born in 1972 in London, UK, and moved to Athens, Greece during the Greek Junta.
He spent his childhood there, and at the age of 17 returned to the UK.
How & Why You should Prepare Here are just a few examples of what that sort of total control may look like: Government in total control The government could not only withhold money … Continue reading CBDC’s Tyranny Is Coming→
Here is a list of 100 of the best based things: Trust is not based, and relying on trust is unbased. It is foolish to ever trust someone, because the only way to … Continue reading 100 Based things→
THE CYPHERPUNK MOVEMENT Let’s make a journey back in time to see where blockchain technology and cryptocurrencies came from. It will take us back to the CypherPunk Movement starting in the 1970’s. Cryptography … Continue reading CypherPunk Movement→
The first ever bitcoin transaction from one person to another, on 2009-01-12 at 04:30 used Pay-to-Public-Key (P2PK), when Satoshi Nakamoto sent coins to Hal Finney in Block 170. P2PK is no longer used … Continue reading Block 170 – First ever bitcoin transaction→
The Art of War (Chinese: 孫子兵法; lit. ‘Sun Tzu’s Military Method’, pinyin: Sūnzi bīngfǎ) is an ancient Chinese military treatise dating from the Late Spring and Autumn Period (roughly 5th century BC). The … Continue reading The Art of War Quotes→
For the first time in human history there is at the disposal of the masses a tool that eliminates the middlemen and takes trust from the hands of humans and beautifully makes it a mathematics code that cannot be breaken, hacked or tricked…
How & Why You should Prepare Here are just a few examples of what that sort of total control may look like: Government in total control The government could not only withhold money … Continue reading CBDC’s Tyranny Is Coming→
Here is a list of 100 of the best based things: Trust is not based, and relying on trust is unbased. It is foolish to ever trust someone, because the only way to … Continue reading 100 Based things→
THE CYPHERPUNK MOVEMENT Let’s make a journey back in time to see where blockchain technology and cryptocurrencies came from. It will take us back to the CypherPunk Movement starting in the 1970’s. Cryptography … Continue reading CypherPunk Movement→
The first ever bitcoin transaction from one person to another, on 2009-01-12 at 04:30 used Pay-to-Public-Key (P2PK), when Satoshi Nakamoto sent coins to Hal Finney in Block 170. P2PK is no longer used … Continue reading Block 170 – First ever bitcoin transaction→
The Art of War (Chinese: 孫子兵法; lit. ‘Sun Tzu’s Military Method’, pinyin: Sūnzi bīngfǎ) is an ancient Chinese military treatise dating from the Late Spring and Autumn Period (roughly 5th century BC). The … Continue reading The Art of War Quotes→
A Design For An Efficient Coordinated Financial Computing Platform
Jag Sidhu
Feb 25, 2021·41 min read
Abstract
Bitcoin was the first to attempt to offer a practical outcome in the General’s Dilemma using Crypto Economic rationale and incentives. Ethereum was the first to abstract the concept of Turing completeness within similar frameworks assumed by Bitcoin.
What Syscoin presents is a combination of both Bitcoin and Ethereum with intuitions built on top to achieve a more efficient financial computing platform which leverages coordination to achieve consensus using Crypto Economic rationale and incentives.
We propose a four-layer tech stack using Syscoin as the base (host) layer, which provides an efficient (ie, low gas cost per transaction) platform.
Some of the main advantages include building scalable decentralized applications, the introduction of a decentralized cost model around Ethereum Gas fees.
This new model proposes state-less parallelized execution and verification models while taking advantage of the security offered by the Bitcoin protocol. We may also refer to this as Web 3.0.
Table Of Contents
Abstract
Introduction
Syscoin Platform
Masternode Configuration
Chain Locks
Blockchain as a Computational Court
Scalability and Security
Efficiency
State Liveness and State Safety
Avoiding Re-execution of Transactions
Validity Proof Systems Overtop Proof-of-Work Systems
Quantum Resistance:
A Design Proposal for Web 3.0
Optimistic vs ZkRollup
Decentralized Cost Model
State-less Layer 1 Design
Related Works
Commercial Interests
Functional Overview
Give Me The Goods
Blockchain Foundry
Acknowledgements
References
Introduction
Syscoin is a cryptocurrency borrowing security and trust models of Bitcoin but with services on top which are conducive for businesses to build distributed applications through tokenization capabilities.
Syscoin has evolved since being introduced in 2013 where it offered a unique set of services through a coloured coin implementation on top of Bitcoin.
These services included aliases(identity), assets(tokens), offers(marketplace), escrow (multisig payments between aliases and marketplaces), and certificates (digital credentials).
In its current iteration, it has evolved to serve availability of consensus rather than data storage itself which requires some liveness guarantees better suited to systems like Filecoin and IPFS.
The recent iteration of Syscoin, version 4.0, streamlined the on-chain footprint to exclusively serve assets, a service which requires on-chain data availability for double-spend protection.
Ultimately, the only data that belongs on the blockchain are proofs that executions occurred (eg, coin transfers, smart contract executions, etc.) and information required to validate those proofs.
We introduced high-throughput payment rails for our asset infrastructure through an innovation we called Z-DAG [1]. This innovation offered real-time probabilistic guarantees of double-spend protection and ledger settlement for real-time point-of-sale. As a result, the token platform is one step closer to mass adoption by providing scalable infrastructure and speed that met or exceeded what was necessary to transact with digital tokens in real-life scenarios.
In addition, a two-way bridge to trustlessly interoperate with Ethereum. This enables Ethereum users to benefit from fast, cheap and secure transactions on Syscoin, and Syscoin users to leverage the Turing complete contract capabilities and ecosystem of Ethereum, all of which exclude custodians or third-parties.
Every decision we’ve made has been with security in mind. We believe that one of the biggest advantages of Syscoin is that it is merge-mined with Bitcoin.
Rather than expend more energy, Syscoin recycles the same energy spent by Bitcoin miners in order to solve blocks while being secured by the most powerful cryptocurrency mining network available.
With this energy efficiency we were able to reduce the subsidy to miners and increase subsidy to masternodes without raising the overall inflation; see Fig 1 for configuration.
Unlike Dashpay, these masternodes are not what you expect, as they have the specific job of running full nodes.
Fig 1: Masternode setup
Syscoin Platform
Today, Syscoin offers an asset protocol and deterministic validators as an enhancement on top of Bitcoin, as summarized below:
UTXO Assets
Compliance through Notary
Fungible and Non-Fungible tokens (Generic Asset infrastructure named SPT — Syscoin Platform Tokens)
Z-DAG for fast probabilistic onchain payments, working alongside payment channel systems like Lightning Networks
Deterministic validators (Masternodes) which run as Long-Living Quorums for distributed consensus decisions such as Chain Locks
Decentralized Governance, 10% of block subsidy is saved to pay out in a governance mechanism through a network wide vote via masternodes
Merged-mined with Bitcoin for shared work alongside Bitcoin miners
Masternode Configuration
With 2400+ masternodes running fullnodes, Z-DAG becomes much more dependable, as does the propagation of blocks and potential forks.
The masternodes are bonded through a loss-less strategy of putting 100000 Syscoin in an output and running full nodes in exchange for block rewards.
A seniority model incentivizes the masternodes to share long-term growth by paying them more for the longer period of service. Half of the transaction fees are also shared between the PoW miners and masternodes to ensure long term alignment once subsidy becomes negligible.
The coins are not locked at any point, and there is no slashing condition if masternodes decide to move their coins, the rewards to those masternodes simply stop.
Sharing Bitcoin’s compact block design, it consumes very little bandwidth to propagate blocks assuming the memory pool of all these nodes is roughly synchronized [2].
The traffic on the network primarily consists of propagating the missing transactions to validate these blocks. Having a baseline for a large number of full-nodes that are paid to be running allows us to create a very secure environment for users.
It proposes higher costs to would-be attackers who either have to attempt a 51% attack of Syscoin (effectively also trying to attack the Bitcoin network), or try to game the mesh network by propagating bad information which is made more difficult by incentivized full-nodes.
The health of a decentralized network consists of the following;
(a) the mining component or consensus to produce blocks, and
(b)the network topology to disseminate information in a timely manner in conditions where adversaries might be lurking.
Other attacks related to race conditions in networking or consensus code are mostly negligible as Syscoin follows a rigorous and thorough continuous development process.
This includes deterministic builds, Fuzz tests, ASAN/MSAN/TSAN, functional/unit tests, multiple clients and adequate code coverage.
Syscoin and Bitcoin protocol code bases are merged daily such that the build/signing/test processes are all identical, allowing us to leverage the massive developer base of Bitcoin.
The quality of code is reflective of taking worst case situations into account. The most critical engineers and IT specialists need confidence that value is secure should they decide to move their business to that infrastructure.
It’s true that there are numerous new ideas, new consensus protocols and mechanisms for achieving synchronization among users in a system through light/full node implementations.
However, in our experience in the blockchain industry over the last 8 years, we understand that it takes years, sometimes generations to bring those functionalities to production level quality useful for commercial applications.
Chain Locks
With a subset of nodes offering sybil resistance through the requirement of bonding 100,000 SYS to become active, plus the upcoming deterministic masternode feature in Syscoin 4.2, we have enabled Chain Locks which attempts to solve a long-standing security problem in Bitcoin [3], where Dashcore was the first project to implement this idea [4] which the industry has since widely accepted as a viable solution [5].
Our implementation is an optimized version of this, in that we do not implement Instant Send or Private Send transactions and thus Syscoin’s Chain Lock implementation is much simpler.
Because of merged-mining functionality with Bitcoin, we believe our chain coupled with Chain Locks becomes the most secure via solving Bitcoin’s most vulnerable attack vector, selfish mining.
These Chain Locks are made part of Long-Living Quorums(LLMQ) which leverage aggregatable Boneh–Lynn–Shacham(BLS) signatures that have the property of being able to combine multiple signers in a Distributed Key Generation(DKG) event to sign on decisions. In this setup, a signature can be signed on a group of parties under threshold constraints without any one of those parties holding the private key associated with that signature. In our case, the signed messages would be a ChainLock Signature (CLSIG) which represent claims on what the block hashes represent of the canonical chain [4].
This model suggests a very efficient threshold signature design was needed to be able to quickly come to consensus across the Masternode layer to decide on chain tips and lock chains preventing selfish mining attacks. See [6] to understand the qualities of BLS signatures in the context of multi-sig use cases.
Ethereum 2.0 design centers around the use of BLS signatures through adding precompile opcodes in the Ethereum Virtual Machine(EVM) for the BLS12–381 curve [7] which Syscoin has adopted.
This curve was first introduced in 2017 by Bowe [8] to the ZCash protocol. Masternodes on Syscoin use this curve and have a BLS key that is associated with each validator. There is the performance comparison to ECDSA (Secp256k1) [9] that shows its usefulness in contrast to what Bitcoin and Syscoin natively use for signature verification.
Blockchain as a Computational Court
A computational court is a way of enforcing code execution on the blockchain’s state. This was first introduced by de la Rouvier [10].
Since the inception of Syscoin and Blockchain Foundry we have subscribed to the idea that the blockchain should be used as a court system rather than a transaction processor.
This debate has stemmed from the block size debate in the Bitcoin community [11]. However, with recent revelations in cryptography surrounding Zero-Knowledge Proofs (ZKP) [12] and particularly Zero-Knowledge Succinct Non-Interactive Argument of Knowledge(zk-STARK) [13], we propose a secure ledger strategy using the Bitcoin protocol as a court (ie, host layer), an EVM or eWASM (ie, operating system layer), computational scaling through ZKP (ie, SDK layer) and business verticals (ie, application layer); see Fig 2
Fig 2: Four-layer tech stack
Scalability and Security
Scalability in blockchain environments is typically measuredbyTotal Transactions per Second (TPS).
This means full trustlessness, decentralization and liveness properties as evidenced by something like Bitcoin.
If trade-offs are made to achieve higher scale it means another property is affected.
A full node is one that creates blocks and/or fully validates every block of transactions.
For the purpose of this discussion, we will refrain on expounding on designs where light-clients are used to give semblance of higher throughput, etc.
However, if two nodes are running the same hardware and doing the same work, the one that provides more TPS performance than the other is considered more scalable. This is not to be confused with throughput which is the measure of output that can be increased by simply adding more hardware resources. Hence, more throughput does not mean more scalable.
Some blockchains require the producers of blocks to run on higher specifications, offering higher throughput but not necessarily more scale.
However, there are projects which employ parallel processing to try to achieve higher scale whilst also enforcing more capable hardware to provide a more efficient overall system [33].
As a logical experiment, the throughput of a system divided by the scalability of the system is what we define as efficiency.
In the following sections, we will outline our proposal for improved efficiency.
Efficiency
The holy grail of blockchain design resides in the ability to have a ledger that can claim to be sublinear while retaining consistency, fault tolerance and full availability (ie, CAP Theorem).
This means there are roughly constant costs for an arbitrary amount of computation performed and being secured by that ledger.
This has always been thought of as impossible and it mostly is unless acceptable trade-offs appear in application designs and they are easy to understand and work around.
Most experts make the assumption that an O(1) ledger is simply impossible and thus design blockchains and force applications to work in certain ways as a result.
We will remove such assumptions and let business processes dictate how they work by giving the ability to achieve O(logk n) for some constant k (ie, polylogarithmic) efficiency with trade-offs.
A polylogarithmic design would give the ability for almost infinite scaling over time for all intents and purposes.
The only bottlenecks would be how fast information can be propagated across the network which would improve over time as telecom infrastructure naturally evolves and increases in both capability and affordability.
Put in context, even Lightning Networks for transactional counts qualifies as a form of sublinear scaling on a transactional basis but not per user, as users must necessarily enter the main chain first before entering a payment channel.
It requires the state of the blockchain to include the users joining the system.
This state (the UTXO balances) is the single biggest factor of efficiency degradation in Bitcoin.
Users need to first start on the main chain and then move into the payment channel system to receive money, meaning that scale is at best O (N) where N is the number of users.
There are some solutions to this problem of state storage on Bitcoin by reducing it via an alternative accumulator strategy to the cost of increased bandwidth [14].
This approach would make the chain state-less, however the validation costs would remain linear to the number of transactions being done. When combined with payment channels, only the costs to get in/out are factored into the validation and this offers an interesting design for payments themselves while providing for on-chain availability.
We consider this as a good path for futuristic scalable payments.
Hence, it is not possible to employ that strategy with general computations. With this design, we are still left with the issue on how to do general computations at higher efficiency.
What we present is the ability to have a polylogarithmic chain at the cost of availability for both payments and general computations where business processes dictate availability policies, and users fully understand these limitations when using such systems.
Users may also be provided the ability to ensure availability for themselves and others at their discretion. This will be expounded upon in the following sections.
State Liveness and State Safety
While many compelling arguments can be made migrating to a state-less design [15], it is not possible to achieve sublinear efficiency without sacrificing some other desired component that we outlined above.
To achieve polylogarithmic efficiency it’s necessary to have a mix of state and stateless nodes working together in harmony on a shared ledger [15].
This should be accomplished in such a way that business processes can dictate direction, and users can choose to pay a little more for security either by using a stateful yet very scalable ledgering mechanism or by paying to ensure their own data availability amortized over the life of that user on such systems.
Presenting the ability for users to make these choices allows us to separate the consensus of such systems and reduce overall complexity.
However, in whatever solution we adopt , we need to ensure that the final implementation allow for both the liveness and safety of that state, which are defined as follows:
State Liveness — Transferring coins in a timely manner
State Safety — Private custody
It is important to adhere to these concepts; if one cannot move one’s coins, then it is as useful as if one burned their coins. Hence, if we had third party custody in place, this would give rise to custodial solutions, and lose decentralized and trustless aspects of the solution, which again is not desired.
The options as described would allow users to decide their state liveliness at their own discretion, while state safety is a required constraint throughout any system design we provide. The doorway to possibilities of sublinear design is opened by giving users the ability to decide.
Avoiding Re-execution of Transactions
In order to scale arbitrarily, independent of the number of transactions — a desired property of increasing throughput — one requires a mechanism to avoid re-executing transactions.
Further, ideally it would be able to batch these transactions together for a two-fold scaling proposition.
There are a few mechanisms in literature that attempted to solve re-execution:
Unfortunately, they require challenge response systems to ensure security, which leads to intricate attack vectors of unbounded risk/reward scenarios.
Multi-Party Computation (MPC) is a mechanism to have parties act under a threshold to decide on actions such as computational integrity of a smart contract. MPC is used in Syscoin for BLS threshold signatures for Chain Locks and Proof-of-Service in quorums of validators deterministically chosen using Fiat-Shamir heuristics on recent block hashes.
The problem with this approach is that validators may become corrupt, hence need to be wrapped in a consensus system along with DKG and random deterministic selection. This was an interesting topic of discovery for the Syscoin team early-on as a way to potentially scale smart contract execution but was ultimately discarded due to the incentive for risk/reward scenarios to favour attacks as the value of the transactions increases.
Hardware enclaves (eg, Intel SGX through remote attestation) were also of particular interest to the Syscoin team as a way to offload execution and avoid re-execution costs.
However, there are a myriad of attack vectors and censorship concerns on the Intel platform . We also should note that the Antarctica model was interesting but required a firmware update from Intel to support such a feature which raises concerns over censorship long term.
The theme amongst all of these approaches is that although re-execution is avoided the communication complexity is largely still linear with the number of transactions on the main chain. The security and trust models are also different from that of the layer 1 assumptions which was not desired. Lacking solvent solutions to avoid re-execution and enable sublinear overall complexity, we were led — in the development of Syscoin 4.0 — to build a trust-minimized two-way bridge between Syscoin and the Ethereum mainchain, offloading the concerns around smart contracts to Ethereum.
With the advent of such promising technology as ZKP and the optimizations happening around them, we have re-considered the possibilities and believe this will play an important role in the development of Web 3.0. This mathematical breakthrough led us to re-test our assumptions and options related to our desired design.
ZKP allows us the desired superlinear scaling trait we had been looking to achieve but they also offer other benefits; namely privacy is very easy to introduce and will not add detectable costs and complexities to verification on the mainchain.
With users controlling their own data, the mainchain and systems may be designed such that only balance adjustments are recorded, not transaction sets (we will explain the case with full data availability below). In this scenario there is no advantage for a miner to gain to be able to collude with users to launch attacks on systems such as Decentralize Finance (DeFi) pools and provenance of transactions.
The flexibility has to be there though for application developers that need experiences consistent with those we have today with Bitcoin/Syscoin/Ethereum, and to enable the privacy use-cases without requiring extra work, knowledge or costs.
Fig 3: Host and EVM layer
Validity Proof Systems Overtop Proof-of-Work Systems
Prior to the use of Proof Systems, the only option for “Validity Proofs” in a permissionless system involved naive replay, and as such greatly limited scalability; in essence this replay is what is still done today in Layer-1 blockchain (L1) solutions, with the known penalty to scalability.
Proof Systems offer a very appealing trait known as succinctness: in order to validate a state transition, one needs to only verify a proof, and this is done at a cost that is effectively independent of the size of the state transition (ie, polylogarithmic in the size of the state transition).
For maximal financial security, the amount of value being stored should depend on the amount of security provided on the settlement side of the ledger.
Proof-of-Work offers the highest amount of security guarantees. Our next generation financial systems begin with optimal ledgering security and add proof systems on top for scaling. Block times are not as important in a world where most users and activity are on Layer-2 blockchain (L2) validity proof based systems.
This liberates engineers who are focused on scalability to define blocks better; safe block times plus the maximal amount of data bandwidth that can be safely propagated in a time sensitive manner across full nodes in the network.
In Syscoin there are incentivized full nodes (ie, deterministic masternodes), so again we can maximize the bandwidth of ledgering capabilities while retaining Bitcoin Proof-of-Work (PoW) security through merged-mining.
Quantum Resistance:
Table 1: Estimates of quantum resilience for current cryptosystems (see [20])
As seen in Table 1, hashing with the SHA256 algorithm is regarded to be quantum safe because it requires Grover’s algorithm to crack in the post-quantum world, and at best the quantum computer will offer only 50% reduction in time to break.
On the other hand, where Shor’s algorithm applies, any pair based cryptographic system will be broken in hours.
For L2, we propose to implement ZKP in the SDK Layer (see Fig 2); namely Non-Interactive Zero Knowledge Proofs(NIZKP).
Popular implementations of NIZKP include Zero-Knowledge Succinct Non-interactive ARgument of Knowledge(zk-SNARKS) and Zero-Knowledge Scalable Transparent ARguments of Knowledge(zk-STARKS).
There are some zk-STARK/zk-SNARK friendly cipher’s employed in zkRollup designs such as MiMC and Pederson hashes for which we lack certainty on classical security, yet are hopeful and would offer quantum resistance within ZKPs.
It is important to note that Bitcoin was developed with change addresses in mind exposing the hash of a public key requires a quantum computer to use Grover’s Algorithm in order to attempt stealing that Bitcoin. Each time a Bitcoin Unspent Transaction Output(UTXO) is spent, the public key is exposed and a new change address — which does not expose the public key — is used as change.
With this in mind, any scalable L2 solution should be quantum resistant because otherwise we undermine Bitcoin design as the gold standard of security.
Fig 4: zkSync Rollup design
A Design Proposal for Web 3.0
The following describes the 4-layers (see Fig 2) of Syscoin’s proposed tech stack for Web 3.0:
[Host Layer] Bitcoin’s design is the gold standard for security and decentralization.
Proof-of-work and Nakamoto Consensus settlement security are widely regarded by academics as the most hardened solution for ledgering value.
It’s possible this may change, however it’s also arguable that the intricate design encompassing Game Theory, Economics, risk reward ratios for attack, and the minimal amounts of compromising attack vectors is likely not to change for the foreseeable future.
UTXO’s (and payments with them) are more efficient than account-based or EVM-based. That said, Bitcoin itself suffers from not being expressive enough to build abstraction for general computation.
[Operating System Layer]
EVM/eWASM is the gold standard for general computation because of its wide adoption in the community.
Anyone building smart contracts are likely using this model or will continue to use it as the standard for autonomous general computation with consensus.
[SDK Layer]
Zero-knowledge proofs are the gold standard for generalized computation scaling for blockchain applications. They enable one-time execution via a prover and enable aggregate proof checking instead of re-execution of complex transactions.
zk-STARKs or zk-SNARKs using collision resistant hash functions that work with only weak cryptographic assumptions and therefore are quantum safe.
At the moment generalized smart contracts are not there yet but we are quickly approaching the day (eg, Cairo, Zinc) when there will be abstractions made to have most Solidity code trans-compile into a native zero-knowledge aware compiler similar to how .NET runtime and C# allows an abstraction on top of C/C++ as an interpretive layer on top
[Application Layer]
Verticals or applications applying the above SDK to define business goals.
Surprisingly, these ideals represent a design that is not shared with any other project in the industry, including Bitcoin or Ethereum.
We feel these ideals, fashioned together in a singular protocol, could possibly present a grand vision for a “World Computer” blockchain infrastructure.
Syscoin has already implemented Geth + Syscoin nodes in one application instance already (ie, release 4.2), we foresee that it will not prove too challenging to have them cooperate on a consensus basis working together to form a dual chain secured by Syscoin’s PoW.
Fig 5: Proposed design
Fig 5 describes a system where nodes are running two sets of software processes, the Syscoin chain protocol and an EVM/eWASM chain protocol which are kept in sync through putting the EVM tip hash into the Syscoin block. Both have their own individual mempools and effectively the Ethereum contracts, tools and processes can directly integrate as is into the EVM chain as it stands.
Note that the two chains are processes running on the same computer together. Thus a SYS NODE and EVM NODE would be operating together on one machine instance (ie, Masternode) with ability to communicate with each other directly through Interprocess Communication(IPC).
The intersection between the two processes happens in three points:
Miner of the EVM chain collects the latest block hash and places it into the Syscoin block.
When validating Syscoin blocks, nodes confirm the validity of the EVM tip by consulting the EVM chain software locally.
Fees for the EVM chain are to be paid in SYS. We need an asset representing SYS on the EVM chain, which will be SYSX.
We will enable this through a similar working concept that we’ve already established (SysEthereum Bridge).
We may also enable pre-compiles on the EVM chain side to extract Syscoin block hashes and merkle roots to confirm validity of SYS to SYSX burn transactions.
This design separates concerns by not complicating the PoW chain with EVM execution information, keeping the processes separate yet operating within the same node.
To further delineate point 1 (see above), a miner would mine both chains. With Syscoin being merged-mined, the work spent on Bitcoin would be shared to create a Syscoin block that includes the EVM chain within it as a ledgering event representing the latest smart contract execution state (composed of Chain Hash, State Root, Receipt Root, and Transaction Trie Root).
Since the EVM chain has no consensus attached, technically a block can be created at any point in time. Creation of Syscoin and EVM blocks will be near simultaneous, and occur every one minute on average.
Fig 6: Merge mining on Syscoin
As seen in Fig 6, work done on BTC is reused to create SYS blocks through the merged-mining specification. Concurrently, the miner will execute smart contracts in the memory pool of the node running the EVM chain. Once a chain hash has been established post-execution, it will be put into the coinbase of the Syscoin block and published to the network. Upon receiving these blocks, every node would verify that the EVM chain which they would locally execute (ie, similar to the miner) matches the state described by the Syscoin block.
Technically, one would want to ensure both the latest and previous EVM block hashes inside of their respective Syscoin blocks are valid.
The block->evmblock == evmblock && block->prev == evmblock->prev is all that is needed to link the chains together with work done by Bitcoin which is propagated to Syscoin through AUXPOW and can serve as a secure ledgering mechanism for the EVM chain.
There has been much discussion as to what the safe block size should be on Ethereum. Gas limits are increasing as optimizations are made on the Ethereum network.
However, since this network would be ledgered by the Syscoin chain through PoW, there would be no concern for uncle orphaning of blocks since the blocks must adhere to the policy set inside of the Syscoin block. We should therefore be able to increase bandwidth significantly and parameterize for a system that will scale globally yet still be centered around L2 rollup designs.
A very important distinction here is that the design of Ethereum 2.0 centers around a Beacon chain and sharding served by a Casper consensus algorithm. The needs of the algorithm require a set of finality guarantees necessitating a move towards Proof-of-Stake (PoS).1
This has large security implications for which we may not have formal analysis for a long time, however we do know it comes with big risk.
We offer similar levels of scalability on a network while retaining Nakamoto Consensus security. The simpler design which has been market tested and academically verified to work would lead to a more efficient system as a whole with less unknown and undocumented attack vectors.
The only research that would need to be made therefore is on the optimal parameterization of the gas limit taking into account an L2 centric system but also a safe number of users we expect to be able to serve before fee market mechanisms begin to regulate the barrier of entry for these users.
This proposed system should be scalable enough to serve the needs of global generalized computation while sticking to the core fundamentals set forth in the design ideals above. Our upcoming whitepaper will have more analysis on these numbers but we include some theoretical scaling metrics at the end of this article.
Optimistic vs ZkRollup
ZKP are excellent for complex calculations above and beyond simple balance transfers. For payments, we feel UTXO payment channels combined with something like Z-DAG is an optimal solution.
However, we are left with rollup solutions for generalized computation involving more complex calculations requiring consensus.
Whatever solution we adopt has to be secured by L1 consensus that is considered decentralized and secure, which we achieve via merged-mining with Bitcoin.
There are two types of rollup solutions today:
(a) Optimistic roll ups (OR); and (b) zkRollups; which offer trade-offs.
Consensus about which chain or network you’re on is a really hard problem that is solved for us by Nakamoto consensus. We build on that secure longest chain rule (supplemented by Chain Locks to prevent selfish mining) to give us the world-view of the rollup states. The executions themselves can be done once by a market of provers, never to be re-executed, only verified, meaning it becomes an almost constant cost on an arbitrarily large number of executions batched together. With OR you have the same world-view but the world-view is editable without verifying executions. The role of determining the validity of that world-view is delegated to someone watching who provides guarantees through crypto-economics. Zero-knowledge proofs remove crypto-economics on execution guarantees and replace them with cryptography.
See [26] to see contrasting benefits between fraud proofs (optimistic) vs validity proofs (zk)
Key takeaways from this article are as follows
Eliminate a nasty tail risk: theft of funds from OR via intricate yet viable attack vectors;
Reduce withdrawal times from 1–2 weeks to a few minutes;
Enable fast tx confirmations and exits in practically unlimited volumes;
Introduce privacy by default.
One point missing is interoperability. A generalized form of cross-chain bridging can be seen in Chain A locking tokens based on a preimage commitment by Chain B to create a zero-knowledge proof, followed by verification of that proof as the basis for manifesting equivalence on Chain B. Any blockchain with the functionality to verify these proofs could participate in the ecosystem.
Our vision here is described using a zkRollup centric world-view, yet it can be replaced with other technologies should they be able to serve the same purpose. As an infrastructure we are not enforcing one or the other; developers can build on what they feel best suits their needs. We believe we are close to achieving this, and that the technology is nearing the point of being ready for the vision set forth in this article.
Decentralized Cost Model
Decentralized cost models lead to exponential efficiency gains in economies of scale. We set forth a more efficient design paradigm for execution models reflective of user intent. This design uses the UTXO model to reflect simple state transitions and a ZKP system for complex computations leading to state transitions. This leads to better scalability for a system by allowing people to actively make their trade-off within the same ecosystem, driven by the same miners securing that ecosystem backed by Bitcoin itself.
Furthermore, a decentralized cost model contributes to scalability in that ZKP gates can generalize complex computation better than fee-market resources like gas or the CPU/memory markets of EOS, etc.
This leads to better scalability for a system by allowing people to actively make their trade-off within the same ecosystem, driven by the same miners securing that ecosystem backed by Bitcoin itself.
Furthermore, a decentralized cost model contributes to scalability in that ZKP gates can generalize complex computation better than fee-market resources like gas or the CPU/memory markets of EOS, etc. This leads to more deterministic and efficient consumption of resources maximizing efficiency in calculations, and gives opportunity for those to scale up or down based on economic incentives without creating monopolistic opportunities unlike ASIC mining.
In other words, the cost is dictated by what the market can offer, via the cost of compute power (as dictated by Moore’s law), rather than the constrained costs of doing business on the blockchain itself.
This model could let the computing market dictate the price for Gas instead of being managed by miners of the blockchain. The miners would essentially only dictate the costs of the verification of these proofs when they enter the chain rather than the executions themselves.
We can already begin to see computational optimization through hardware happening with ZKP and with a decentralized cost model it will be much easier to understand costs of running prover services as well as know how the costs scale based on the number of users and parameters of systems that businesses would like to employ. All things considered, it will be easier to make accurate decisions on data availability policies and the consensus systems needed to keep the system censorship resistant and secure.
Rollups will be friends, that is, users of one rollup system doing X TPS and users of another doing Y TPS, with the same trust model, will in effect get us to global rates of X*Y (where X is TPS of the sidechains/rollups and Y is the number of sidechains and rollups that exist). X is fairly static in that the execution models of rollups do not change drastically (and if they do, the majority of those rollup or sidechain designs end up switching to the most efficient design for execution over time).
State-less Layer 1 Design
The single biggest limiting factor of throughput in blockchains is state growth and access to the global state.
More specifically, in Bitcoin it is the UTXO set, and in Ethereum it is the Account Storage and World State tries. State lookups typically require SSD in Ethereum full nodes because real-time processing of transactions of block arrivals are critical to reaching consensus, this is especially the case for newly arriving blocks (ie, every 10–15 seconds).
As state and storage costs rise, the number of full verifying nodes decreases due to the resource consumption of fully validating nodes and providing timely responses to peers. Consequently, network health suffers due to the risks of centralization of consensus amongst the subset peers running full nodes.
State-less designs are an obvious preference to solve problems using alternative mechanisms to validate the chain without requiring continuous updates to the global state.
In a rollup, smart contracts on L1 do not access the global state unless entering or exiting a rollup. Therefore smart contracts that provide full data availability on-chain (ie, zkRollup), would only require state updates to the local set of users within that L2. Under designs where data availability is kept off-chain, there is no state update on L1, unless entering and exiting.
Therefore, it classifies as purely state-less, whereas in zkRollup mode we can consider this partially state-less. Since these L1 contracts are state-less to the global state, nodes on the network can parallelize verification of any executions to the contracts which do not involve entering or exiting. This is in addition to the organic and natural parallel executions of transactions that are composing these rollup aggregated transactions posted on L1.
State-less layer 1 designs also allow for parallelizable smart contract execution verification. The parallelization of smart contracts running on L1 in the EVM model is a recent topic of research that some projects have implemented in production which involves defining “intent” for the execution of a contract (because nodes do not know ahead of time what the smart contract execution will entail in terms of accessing global state).
Adding in the intent of a transaction as supplied as part of the commitment of that transaction would allow nodes to reject if the execution of that contract did not correspond with the intent, possibly costing the user fees for invalid commitments.
Although these designs may be flexible, they come at the cost of additional complexity through sorting, filtering and general logic that may be susceptible to intricate attacks.
In our case, the transaction can include a field that is understood by the EVM to denote if it is intending to use global state in any way (for rollups typically this would be false) then we can simply reject any access to global states for those specific types of executions.
This would allow nodes to execute these specific types of transactions in parallel knowing that no global state is allowed to access executions. If a transaction is rejected due to incorrectly setting this field the fees are still spent to prevent users from purposefully setting this field incorrectly.
Related Works
The following organizations offer various open source third party L2 scaling solutions:
Starkware is built using a general purpose language (Cairo) with Solidity (EVM) in mind, as is Matter labs with the (Zinc) language. Hermez developed custom circuits tailor-suited to fast transactions and Decentralized Exchange (DEX) like capability. These will be able to directly integrate into Syscoin without modification.
As such, the optimizations and improvements they make should directly be portable to Syscoin, hence becoming partners to our ecosystem.
Aleo uses Zero knowledge EXEcution(Zexe) for zkSNARK proof creation through circuits created from R1CS constraints. The interesting thing about Aleo is that there is a ledger itself that is purpose-built to only verify these Zexe proofs for privacy preserving transactability. The consensus is PoW, while the proof system involves optimizing over the ability to calculate the verifications of these proofs efficiently.
The more efficient these miners become at verifying these proofs, the faster they are able to mine and thus the system provides sybil resistance through providing resources to verify Zexe proofs as a service in exchange for block creation.
However, these proof creations can be done in parallel based on the business logic for the systems the developers need to create. There is no direct need for on-chain custom verification as these can be done in an EVM contract, similar to what Cairo Generic Proving Service (GPS) verifier and Zinc Verification do.
The goal of Aleo is to incentivize miners to create specialized hardware to more efficiently mine blocks with verification proofs.
However, provers can also do this as we have seen with Matter Labs’ recent release of FPGA to do more efficient zkSNARK proofs [27]. It is a desirable property to use PoW to achieve “world-view” consensus in Aleo; however they focus on private transactions. They are typically not batched and employ a recursive outer proof to guarantee execution of an inner proof where the outer proof is sent to the blockchain to be verified. This proof is a limited 2-step recursion, consequently batching of arbitrary amounts of transactions is not supported.
However, as a result the cost of proof verification is relatively constant with a trade-off of limiting the recursion depth. Aleo is not meant to be a scalable aggregator of transactions, but mainly oriented towards privacy in their zk-SNARK constructions using Zexe.
Commercial Interests
Commercial enterprises may start to create proprietary prover technologies where costs will be lower than market in an attempt to create an advantage for user adoption. This design is made possible since the code for the prover is not required for the verifier to ensure that executions are correct. The proof is succinct whether or not the code to make the proof is available.
While the barrier of entry is low in this industry, we’ve seen the open source model and its communities optimize hardware and software and undergo academic peer review using strategies that outpace private funded corporations.
That is plausible to play out over the long term. However, an organic market will likely form on its own, forging its own path leading to mass adoption through capitalist forces.
The point here is that the privately funded vs open source nature of proving services does not change the mechanism of secure and scalable executions of calculations that are eventually rooted to decentralized and open ledgers secured by Bitcoin.
The utmost interesting propositions are the verticals that become possible by allowing infrastructure that is parameterized to scale into those economies where they are needed most, and where trust, security and auditability of value are concerns.
Smart cities, IoT, AI and Digital sovereignty are large markets that intersect with blockchain as a security blanket.
Although ZKP are tremendously useful on their own, applying them to consensus systems for smart contract executions drive them to another level due to the autonomous nature of “code-is-law” and provable deterministic state of logic. We believe a large majority of the next generation economy will depend on many of the ideas presented here.
Blockchain Foundry is working with commercial and enterprise adopters of blockchain technology. Our direct interaction with clients combined with our many collective years of experience in this field are reflected in this design.
Functional Overview
Fig 7: High-level description
For scalable simple payments, one can leverage our Syscoin Platform Token (SPT) asset infrastructure and payment channels to transact at scale.
Unique characteristics of SPTs include a generalized 8 byte field for the asset ID which is split between the upper and lower 4 bytes; the upper 4 are issued and definable (ie, NFT use cases) and lower 4 are deterministic. This enables the ability to have a generalized asset model supporting both Non-fungible Tokens (NFT) and Fungible Tokens (FT) without much extra cost at the consensus layers. 1 extra byte is used for all tokens at best case and 5 extra bytes are used for NFT at worst case.
This model promotes multiple assets to be used as input and consequently as outputs, suggesting that atomic swaps between different assets are possible within 1 transaction. This has some desirable implications when using payment channels for use cases such as paying in one currency when merchants receive another atomically.
A multi-asset payment channel is a component that is desired so users are not constrained to single tokens within a network. Composability of assets as well as composability across systems (such as users from one L2 to another) is a core fundamental to UX and convenience that needs to be built into our next generation blockchain components that we believe will enable mass adoption.
The Connext box shows how potentially you can move from one L2 on one network to another as described in [29]. This would promote seamless cross-chain L2 communication without the high gas fees. Since these L2’s are operating under an EVM/eWASM model, there are many ways to enable this cross-communication.
An EVM layer will support general smart contracts compatible with existing Ethereum infrastructure and L2 rollups will enable massive scale. The different types of zkRollups will allow businesses and rollup providers to offer ability for custom fee markets (ie, pay for fees in tokens other than base layer token SYS).
In addition, it will remove costs and thus improve scale of systems by offering custom data availability consensus modules. This design discussed here shares similarities to the zkPorter design where a smart contract would sign off on data availability checks that would get put into the ZKP as part of the validity of a zkBlock which goes on chain.
The overall idea of the zkPorter design is that the zkRollup system would be called a “shard”, and each shard would have a type either operating in “zkRollup” mode or operating in “normal” mode.
Taken from the zkPorter article the essence of it is:
If a shard type is zkRollup, then any transaction that modifies an account in this shard must contain the changes in the state that must be published as L1 calldata (same as a zkRollup).
Any transaction that modifies accounts in at least two different shards must be executed in zkRollup mode.
All other transactions that operate exclusively on the accounts of a specific shard can be executed in normal shard mode (we will call them shard transactions). If a block contains some shard transactions for a shard S, then the following rules must be observed:
The root hash of the subtree of the shard S must be published once, as calldata on L1. This guarantees that users of all other shards will be able to reconstruct their part of the state.
The smart contract of the data availability policy of this shard must be invoked to enforce additional requirements (e.g. verify the signature of the majority of the shard consensus participants).
This concludes that shards can define different consensus modules for data availability (censorship resistance mechanisms) via separating concerns around ledgering the world-view of the state (ie, ZKP that is put on L1 and the data that represents the state. Doing so would allow shards to increase scale, offload costs of data availability to consensus participants.
A few note-worthy examples of consensus for data availability are:
Non-committee, non fraud proof based consensus for data availability checks. No ⅔ online assumption; see ethresear.ch post [30].
Sublinear block validation of ZKP system. Use something like Lazy Ledger as a data availability proof engine and majority consensus; see ethresear.ch post [31].
Use a combination of above, as well as masternode quorum signatures for any of the available quorums to sign a message committing to data availability checks as well as data validity. Using masternodes can provide a deterministic set of nodes to validate decisions as a service. The data can be stored elsewhere accessible to the quorums as they reach consensus that it is indeed valid and available.
Give Me The Goods
You may be wondering what a system like this can offer in terms of scale …
Simple payments: since payment channels work with UTXO’s and also benefit from on-chain scaling via Z-DAG, 16MB blocks (with segwit weight) assumed, we will see somewhere around 8MB-12MB effectively per minute (per block).
We foresee that is sufficient to serve 7 Billion people who may enter and exit the payment channel networks once a year (ie, 2 transactions on chain per person per year) for a total of 14 Billion transactions.
Let’s conservatively assume 8MB blocks and 300 bytes per transaction. Once on a payment channel, the number of transactions is not limited to on-chain bandwidth, but to network related latencies and bandwidth costs. Therefore, we will conclude that our payment scalability will be able to serve billions of people doing 2 on-chain transactions per year which is arguably realistic based on the way we envision payments to unfold; whether that is an L2 or payment channel network that will hold users to pay through instant transaction mechanisms.
On-chain, we have some metrics on Z-DAG throughput [1]; in those cases someone needs to transact for point-of-sale using the Syscoin chain. The solution for payments ends up looking like a hybrid mechanism of on-chain (Z-DAG) and off-chain (ie, payment channel) style payments.
Complex transactions such as smart contracts using zkRollups require a small amount of time to verify each proof. In this case, we assume that we will host data off-chain while using an off-chain consensus mechanism to ensure data availability for censorship resistance; so the only thing that goes on the chain are validity proofs. We will assume that we will assign 16MB blocks for the EVM chain per minute.
A proof size will be about 300kB for about 300k transactions batched together which will take about 60–80ms to verify and roughly 5 to 10 minutes to create such proofs.
These are the Reddit bake-off estimates using zk-STARKs which present quantum resistance and no trusted setup.
After speaking with Eli Ben-Sasson, we were made aware that proving and verifications metrics are already developed compared to what is currently presented by Starkware [34].
Hence, zk-SNARKs offer even smaller proofs and verification times at the expense of trusted setups and stronger cryptography assumptions (not post-quantum safe).
We foresee that these numbers will improve over time as the cryptography improves, but current estimates suggest a rough theoretical capacity of around 1 Million TPS.
Starkware was able to process 300k transactions over 8 blocks with a total cost of 94.5M gas; final throughput was 3000 TPS (see Reddit bake-off estimates). As a result, or the following calculations, let’s assume one batch-run to be 300k transactions.
Ethereum can process ~200kB of data per minute, with a cost limit of 50M gas per minute. Therefore, considering the Starkware benchmark test, and assuming a block interval of 13 seconds, we would achieve ~ 3000 TPS (ie, 300 k transactions per batch-run / (8 blocks per batch-run * 13 seconds per block))
It is estimated that Syscoin will be able to process ~16MB of data per minute on the EVM layer (ie, SYSX in Fig 3), which is ~80x gain over Ethereum; thus a cost limit of 4B gas (ie, 80*50M) per minute.
Therefore, if the Starkware benchmark test was run on Syscoin, it is estimated that Syscoin could run the equivalent of 42 batch-runs per minute (ie, 4B gas per minute / 94.5 M gas per batch-run).
That would result in an equivalent of 210 k TPS (ie, 42 batch-runs per minute * 300 k transactions per batch-run / 60 seconds per minute).
If we were to consider using Validum on the Syscoin EVM layer, we estimate that we could achieve 800 batch-runs per minute (ie, 4B gas per minute / 5 M gas per batch-run). That would equate to an equivalent of 4M TPS (ie, 800 batch-runs per minute * 300 k transactions per batch-run / 60 seconds per minute).
Table 2: Gas costs and Total throughput
* Because all transactions are on-chain, which would include state lookups and modifications, it would likely result in a smaller total throughput depending on the node. This would be on average somewhere between 50–150 TPS total due to the state lookup bottlenecks, which are not an issue in a rollup design and can be done in a state-less way on-chain (meaning the throughput can instead be bounded by computational verification of the ZKPs)
**Rollups post the transitions on-chain and Validium does not, but note that the transitions on chain are account transitions and not transactions and so if some accounts interact within the same batch it will be just those account transitions recorded to the chain regardless of how many actual transactions are done between them.This is the minimum TPS with full layer 1 decentralized security. The amortized cost per Tx thus drops as accounts are reused within the This is the minimum TPS with full layer 1 decentralized security. The amortized cost per Tx thus drops as accounts are reused within the batch and the total TPS would subsequently rise.
Optimizations to the verification process are likely and would be required to get to those numbers, but the bandwidth would allow for such scale should those optimizations come to fruition.
For example 800 zk-STARK verifications at roughly 80ms per zk-STARK would take around 64 seconds, however these proofs can be verified in parallel so with a 32-core machine. It would take ~2–3 seconds total spent on these proofs, and likely decrease further with optimizations (note that TPS includes total account adjustments).
The aforementioned calculations demonstrate the full State Safety of the mainchain secured by Bitcoin, and no asynchronous network assumptions which make theoretical calculations impractical in many other claims of blockchain throughput due to execution model bottlenecks.
These results were extrapolated based on real results with constant overhead added that becomes negligible with optimizations. It is imperative to note that transactions in this strategy are not re-executable; there is little to no complexity in this model other than verifying succinct proofs. The proof creation strategy is parallelized organically using this model. The verifications on the main chain can also be parallelized as they are executed on separate shards or rollup networks. Dual parallel execution and verification gives exponentially more scalability than other architectures.
Additionally, privacy can be built into these models at minimal to no extra cost, depending on the business model. Lastly, we suggest these are sustainable throughput calculations and not burst capacity numbers which would be much higher (albeit with a marginally higher fee based on fee markets).
For example Ethereum is operating at 15 TPS but there are around 150k transactions pending, and the average cost is about 200 gWei currently. The fee rate is based on the calculation that it takes around 10000 seconds to clear, assuming this many transactions, no new transactions, and there is demand to settle earlier.
Extrapolating on 4M TPS the ratio would become 40B transactions pending with 4M TPS to achieve the same fee rate on Ethereum today assuming the memory pool is big enough on nodes to support that many pending transactions.
Since masternodes on Syscoin are paid to provide uptime, we can expect network bandwidth to scale up naturally to support higher throughput as demand for transaction settlement increases.
Today, the ability to transact at a much higher rate using the same hardware provides the ability for a greater scale than the state-of-the-art in blockchain design without the added desired caveat of avoiding asynchronous network assumptions.
We believe this proposed design will become the new state-of-the-art blockchain, which is made viable due to its security, flexibility and parallelizable computational capacity.
In regards to uncle rates with higher block sizes, keep in mind we make uncle rates and re-organizations in general negligible through the use of the PoW chain mining Syscoin along with Chain Locks. We provide intuition that block sizes can be increased substantially without affecting network health.
Furthermore, the gas limits can be adjusted by miners up to 0.1% from the previous block and so a natural equilibrium can form where even if more than 4B gas is required it can be established based on demand and how well the network behaves with such increases.
There is a lot to unpack with such statements and so we will cover this in a separate technical post as it is out-of-scope for this discussion.
Blockchain Foundry
One of the main reasons for a profit company is to take advantage of some of the aforementioned verticals which we expect to underpin the economies of tomorrow with infrastructure similar to what is presented here.
Since the company’s beginning in 2016, we have spent the majority of our existence designing architecture parameterized to global financial markets.
Breakthroughs in cryptography and consensus designs as described here lead us to formalize these designs to apply to market verticals, formulating new applications and solutions that would not have been possible before.
Specifically, , we believe these ideas can be IP protected without requiring privatization of the entire tech stack. These value-added ideas that will use existing open-source tech stacks enabling a massive network effect of value through incentivization of commercial and enterprise adoption.
These new ideas, innovations and proprietary production quality solutions could steer in a new wave of prosperity for civilization.
References
[1] J. Sidhu, E, Scott, and A. Gabriel, Z-DAG: An interactive DAG protocol for real-time crypto payments with Nakamoto consensus security parameters, Blockchain Foundry Inc, Feb. 2018. Accessed on: Feb 2021. [Online]. Available: https://syscoin.org
[3] I. Eyal and E. G. Sirer, Majority is not enough: Bitcoin mining is vulnerable, Proceedings of International Conference on Financial Cryptography and Data Security, pp. 436–454, 2014.
[11] Anonymous Kid, Why the fuck did Satoshi implement the 1 MB blocksize limit? [Online forum comment], Jan 2018, Accessed on: Feb 2021. [Online]. Available: https://bitcointalk.org/index.php?topic=2786690.0
[12] Zero-Knowledge Proofs What are they, how do they work, and are they fast yet? Accessed on: Feb 2021. [Online]. Available: https://zkp.science/
[13] E. Ben-Sasson, I. Bentov, Y. Horesh, and M. Riabzev, Scalable, transparent, and post-quantum secure computational integrity, IACR Cryptol, 2018, pp 46
[14] Dryja, T, Utreexo: A dynamic hash-based accumulator optimized for the bitcoin UTXO set, IACR Cryptol. ePrint Arch., 2019, p. 611.
[16] S. Bowe, A. Chiesa, M. Green, I. Miers, P. Mishra, H. Wu: Zexe: Enabling decentralized private computation. Cryptology ePrint Archive, Report 2018/962 (2018). Accessed on: Feb 2021. [Online]. Available: https://par.nsf.gov/servlets/purl/10175111
[17] A. Nilsson, P.N. Bideh, J. Brorsson, A survey of published attacks on Intel SGX. 2020, arXiv:2006.13598
[20] Quantum Computing’s Implications for Cryptography (Chapter 4), National Academies of Sciences, Engineering, and Medicine: Quantum Computing: Progress and Prospects. The National Academies Press, Washington, DC, 2018.
[24] V. Buterin and V. Griffith, Casper the Friendly Finality Gadget. CoRR, Vol. abs/1710.09437, 2017. arxiv: 1710.09437, http://arxiv.org/abs/1710.09437
[25] M. Neuder, D.J. Moroz, R. Rao, and D.C. Parkes, Low-cost attacks on Ethereum 2.0 by sub-1/3 stakeholders, 2021. arXiv:2102.02247, https://arxiv.org/abs/2102.02247
[32] T. Chen, X. Li, Y. Wang, J. Chen, Z Li, X. Luo, M. H. Au, and X. Zhang. An adaptive gas cost mechanism for Ethereum to defend against under-priced DoS attacks. Proceedings of Information Security Practice and Experience — 13th International Conference ISPEC, 2017
[33] Y. Sompolinsky, and A. Zohar, Secure High-rate Transaction Processing in Bitcoin, Proc. 19th Int. Conf. Financial Cryptogr, Data Secur. (FC’20), Jan 2015, pp. 507–527
[34] Starkware Team, Rescue STARK Documentation — Version 1.0, Jul 2020
Cryptoassets being held, generally as longer-term plays; sometimes used self-deprecatingly for soft or losing positions one should close, but can’t for whatever reason. “Too bad none of my alt bags saw the moon that I did today. #cryptoeclipse”
Bitcoin Maximalists
The truest believers in bitcoin’s original mission and design, often paired with a disdain for altcoins.
Block
Blocks are found in the Bitcoin block chain. Blocks connect all transactions together.
Transactions are combined into single blocks and are verified every ten minutes through mining.
Each subsequent block strengthens the verification of the previous blocks, making it impossible to double spend bitcoin transactions (see double spend below).
BIP
Bitcoin Improvement Proposal or BIP, is a technical design document providing information to the bitcoin community, or describing a new feature for bitcoin or its processes or environment which affect the Bitcoin protocol.
New features, suggestions, and design changes to the protocol should be submitted as a BIP.
The BIP author is responsible for building consensus within the community and documenting dissenting opinions.
Black Swans
A black swan is an event or occurrence that deviates beyond what is normally expected of a situation and is extremely difficult to predict.
Black swan events are typically random and unexpected.
The term was popularized by Nassim Nicholas Taleb, a finance professor, writer, and former Wall Street trader.
Block Chain
The Bitcoin block chain is a public record of all Bitcoin transactions. You might also hear the term used as a “public ledger”.
The block chain shows every single record of bitcoin transactions in order, dating back to the very first one.
The entire block chain can be downloaded and openly reviewed by anyone, or you can use a block explorer to review the block chain online.
Block Height
The block height is just the number of blocks connected together in the block chain. Height 0 for example refers to the very first block, called the “genesis block”.
Block Reward
When a block is successfully mined on the bitcoin network, there is a block reward that helps incentivize miners to secure the network.
The block reward is part of a “coinbase” transaction which may also include transaction fees.
The block rewards halves roughly every four years; see also “halving”.
BTFD | #BTFD
“Buy the Fucking Dip” Advice to other traders to pick up a coin that’s presumably hit its bottom.
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Change
Let’s say you are spending $9.90 in your local supermarket, and you give the cashier $10.00. You will get back .10 cents in change.
The same logic applies to bitcoin transactions.
Bitcoin transactions are made up of inputs and outputs.
When you send bitcoins, you can only send them in a whole “output”.
The change is then sent back to the sender.
Cold Storage
The term cold storage is a general term for different ways of securing cryptocurrency offline (disconnected from the internet).
This would be the opposite of a hot wallet or hosted wallet, which is connected to the web for day-to-day transactions.
The purpose of using cold storage is to minimize the chances of your bitcoins being stolen from a malicious hacker and is commonly used for larger sums of bitcoins.
Cold Wallet and Hot Wallet
Cold storage is an offline wallet provided for storing cryptocurrency.
With cold storage, the digital wallet is stored on a platform that is not connected to the internet, thereby, protecting the wallet from unauthorized access, cyber hacks, and other vulnerabilities that a system connected to the internet is susceptible to.
Confirmation
A confirmation means that the bitcoin transaction has been verified by the network, through the process known as mining.
Once a transaction is confirmed, it cannot be reversed or double spent.
Transactions are included in blocks.
Cryptocurrency
Cryptocurrency is the broad name for digital currencies that use blockchain technology to work on a peer-to-peer basis.
Cryptocurrencies don’t need a bank to carry out transactions between individuals.
The nature of the blockchain means that individuals can transact with each other, even if they don’t trust each other.
The cryptocurrency network keeps track of all the transactions and ensures that no one tries to renege on a transaction.
Cryptocurrency 2.0
Also known as a decentralized app,(Dapp) a cryptocurrency 2.0 project uses the blockchain for something other than simply creating and sending money.
They typically involve decentralized versions of online services that were previously operated by a trusted third party.
Cryptography
Cryptography is used in multiple places to provide security for the Bitcoin network.
Cryptography, which is essentially mathematical and computer science algorithms used to encrypt and decrypt information, is used in bitcoin addresses, hash functions, and the block chain.
Cypherpunk
1. A person with an interest in encryption and privacy, especially one who uses encrypted email.
2. Cypherpunk, a term that appeared in Eric Hughes’ “A Cypherpunk’s Manifesto” in 1993, combines the ideas of cyberpunk, the spirit of individualism in cyberspace, with the use of strong encryption ( ciphertext is encrypted text) to preserve privacy.
Cypherpunk advocates believe that the use of strong encryption algorithms will enable individuals to have safely private transactions.
They oppose any kind of government regulation of cryptography.
They admit the likelihood that criminals and terrorists will exploit the use of strong encryption systems, but accept the risk as the price to be paid for the individual’s right to privacy.
Dark Web
The part of the World Wide Web that is only accessible by means of special software, allowing users and website operators to remain anonymous or untraceable.
The Dark Web poses new and formidable challenges for law enforcement agencies around the world.
Decentralized
Having a decentralized bitcoin network is a critical aspect.
The network is “decentralized”, meaning that it’s void of a centralized company or entity that governs the network.
Bitcoin is a peer-to-peer protocol, where all users within the network work and communicate directly with each other, instead of having their funds handled by a middleman, such as a bank or credit card company.
Difficulty
Difficulty is directly related to Bitcoin mining (see mining below), and how hard it is to verify blocks in the Bitcoin network.
Bitcoin adjusts the mining difficulty of verifying blocks every 2016 blocks.
Difficulty is automatically adjusted to keep block verification times at ten minutes.
Dogecoin
Dogecoin is an altcoin that first started as a joke in late 2013. Dogecoin, which features a Japanese fighting dog as its mascot, gained a broad international following and quickly grew to have a multi-million dollar market capitalization.
Double Spend
If someone tries to send a bitcoin transaction to two different recipients at the same time, this is double spending. Once a bitcoin transaction is confirmed, it makes it nearly impossible to double spend it. The more confirmations that a transaction has, the harder it is to double spend the bitcoins.
DYOR | #DYOR
“Do Your Own Research.” The trader’s caveat that advice shouldn’t be taken at face value.
“$BCY has an appealing risk/reward here. Could take a few months to play out, however, and will require patience. #DYOR”
Exit Scam
Traditionally a term for darknet markets and vendors that, after building up a good reputation, accumulate bitcoins and disappear; exit scams are also feared by ICO participants who worry that, once they’ve raised hundreds of millions in hard-to-trace money, the developers will take the money and run.
Fiat
Government-issued money.
Full Node
A full node is when you download the entire block chain using a bitcoin client, and you relay, validate, and secure the data within the block chain.
The data is bitcoin transactions and blocks, which is validated across the entire network of users.
FOMO | #FOMO
“Fear of Missing Out.” When a coin starts to moon, dumb money rushes in. “$LGD on a TEAR right now!!! It has major highs right now! Some major #FOMO going on!!! Sell while it’s high. It WILL drop before fight!!!”
FUD
“Fear, Uncertainty, and Doubt.”
Another non-crypto term that describes attempts to scare weak-handed coin-holders into selling their positions, often with rumors of exit scams or hacks; the cheap, dumped coins are then picked up by the FUD-ers.
Fungibility
Fungibility is a good or asset’s interchangeability with other individual goods or assets of the same type.
Assets possessing this fungibility property simplify the exchange and trade processes, as interchangeability assumes everyone values all goods of that class the same.
HODL
HOLD ON FOR DEAR LIFE!
The intentionally misspelled word hodl has its roots in a December 2013 post on the Bitcoin Talk forum, “I AM HODLING”; when the author, GameKyuubi, couldn’t be bothered to fix his typo, the community instantly turned it into a verb: to hodl.
Along with other terms, hodl is an effective litmus test for sussing out newcomers, carpetbaggers, and tourists.
Halving
Bitcoins have a finite supply, which makes them scarce.
The total amount that will ever be issued is 21 million.
The number of bitcoins generated per block is decreased 50% every 210,000 blocks,roughtly four years.
This is called “halving.”
The final halving will take place in the year 2140.
Hash
A cryptographic hash is a mathematical function that takes a file and produces a relative shortcode that can be used to identify that file.
A hash has a couple of key properties:
• It is unique.
Only a particular file can produce a particular hash, and two different files will never produce the same hash.
• It cannot be reversed.
You can’t work out what a file was by looking at its hash.
Hashing is used to prove that a set of data has not been tampered with.
It is what makes bitcoin mining possible.
Hash Rate
The hash rate is how the Bitcoin mining network processing power is measured.
In order for miners to confirm transactions and secure the block chain, the hardware they use must perform intensive computational operations which is output in hashes per second.
Then, try changing just a letter in the input text to see how the resulting hash varies significantly
Hard Fork
A hard fork is when a single cryptocurrency splits in two.
It occurs when a cryptocurrency’s existing code is changed, resulting in both an old and new version.
Meanwhile a soft fork is essentially the same thing, but the idea is that only one blockchain (and thus one coin) will remain valid as users adopt the update.
So both fork types create a split, but a hard fork is meant to create two blockchain/coins and a soft fork is meant to result in one.
Segwit was a soft fork, Bitcoin Cash, Bitcoin Gold, and Segwit2x are all hard forks.
Immutability
In object-oriented and functional programming, an immutable object (unchangeable object) is an object whose state cannot be modified after it is created.
This is in contrast to a mutable object (changeable object), which can be modified after it is created.
Lambo | #Lambo
A running joke among traders, you’re cryptorich when you can buy a Lamborghini; though absurd, it’s not unheard of — when Alexandre Cazes, the suspected founder of a major darknet marketplace, was found hanged in his Bangkok jail cell, Thai media reported that he owned four Lamborghinis.
Mining
Bitcoin mining is the process of using computer hardware to do mathematical calculations for the Bitcoin network in order to confirm transactions.
Miners collect transaction fees for the transactions they confirm and are awarded bitcoins for each block they verify.
Moon | #Moon
A rapid price increase.
Peer-to-Peer
Typically, online applications are provided by a central party that organizes all the transactions.
Your bank runs its own computers, and all the customers log into the bank’s computer to handle their transactions.
If Bob wants to send money to Alice, he asks the bank to do it, and the bank controls everything.
In a peer-to-peer arrangement, technology cuts out the middleman, meaning that people deal directly with each other.
Bob would send the money directly to Alice, and there wouldn’t be any bank involved at all.
Pool
As part of bitcoin mining, mining “pools” are a network of miners that work together to mine a block, then split the block reward among the pool miners.
Mining pools are a good way for miners to combine their resources to increase the probability of mining a block, and also contribute to the overall health and decentralization of the bitcoin network.
Private Key
A private key is a string of data that shows you have access to bitcoins in a specific wallet.
Think of a private key like a password; private keys must never be revealed to anyone but you, as they allow you to spend the bitcoins from your bitcoin wallet through a cryptographic signature.
Proof of Work
Proof of work refers to the hash of a block header (blocks of bitcoin transactions).
A block is considered valid only if its hash is lower than the current target.
Each block refers to a previous block adding to previous proofs of work, which forms a chain of blocks, known as a block chain.
Once a chain is formed, it confirms all previous Bitcoin transactions and secures the network.
Pump
A rapid price increase believed to be the result of market manipulation, a.k.a. pump and dump.
Public Address
A public bitcoin address is cryptographic hash of a public key.
A public address typically starts with the number “1.”
Think of a public address like an email address.
It can be published anywhere and bitcoins can be sent to it, just like an email can be sent to an email address.
Private Key
A private key is a string of data that shows you have access to bitcoins in a specific wallet.
Think of a private key like a password; private keys must never be revealed to anyone but you, as they allow you to spend the bitcoins from your bitcoin wallet through a cryptographic signature.
Rekt | #Rekt
Meaning “wrecked”.
“I never sell because of #FUD, and I never buy because of #FOMO.
That’s the easiest way to get #Rekt”
Sats
Satoshis, currently the smallest unit of a single bitcoin, useful for tracking coin prices. “At the rate $XRP’s moving, I wouldn’t be surprised if it hits 10K sats by the end of the day.”
Security Tokens
A security token (sometimes called an authentication token) is a small hardware device that the owner carries to authorize access to a network service.
The device may be in the form of a smart card or may be embedded in a commonly used object such as a key fob.
Shitcoins
Pejorative term for altcoins, especially low-cap coins, often affectionately used by shitcoin hodlers.
SEGWIT
SegWit is the process by which the block size limit on a blockchain is increased by removing signature data from Bitcoin transactions.
When certain parts of a transaction are removed, this frees up space or capacity to add more transactions to the chain.
Transaction
A transaction is when data is sent to and from one bitcoin address to another.
Just like financial transactions where you send money from one person to another, in bitcoin you do the same thing by sending data (bitcoins) to each other.
Bitcoins have value because it’s based on the properties of mathematics, rather than relying on physical properties (like gold and silver) or trust in central authorities, like fiat currencies.
Wallet
Just like with paper dollars you hold in your physical wallet, a bitcoin wallet is a digital wallet where you can store, send, and receive bitcoins securely.
There are many varieties of wallets available, whether you’re looking for a web or mobile solution.
Ideally, a bitcoin wallet will give you access to your public and private keys.
This means that only you have rightful access to spend these bitcoins, whenever you choose to.
Whale
Anyone who owns 5 percent of any given coin, often used as a boogeyman to explain unwanted price movements.
“Nice support $NEO. Clear whale manipulation.”
Blue Pill vs. Red PillChoose wiselyWhen You’re ready …
How & Why You should Prepare Here are just a few examples of what that sort of total control may look like: Government in total control The government could not only withhold money … Continue reading CBDC’s Tyranny Is Coming→
Here is a list of 100 of the best based things: Trust is not based, and relying on trust is unbased. It is foolish to ever trust someone, because the only way to … Continue reading 100 Based things→
THE CYPHERPUNK MOVEMENT Let’s make a journey back in time to see where blockchain technology and cryptocurrencies came from. It will take us back to the CypherPunk Movement starting in the 1970’s. Cryptography … Continue reading CypherPunk Movement→
The first ever bitcoin transaction from one person to another, on 2009-01-12 at 04:30 used Pay-to-Public-Key (P2PK), when Satoshi Nakamoto sent coins to Hal Finney in Block 170. P2PK is no longer used … Continue reading Block 170 – First ever bitcoin transaction→
The Art of War (Chinese: 孫子兵法; lit. ‘Sun Tzu’s Military Method’, pinyin: Sūnzi bīngfǎ) is an ancient Chinese military treatise dating from the Late Spring and Autumn Period (roughly 5th century BC). The … Continue reading The Art of War Quotes→
Mining Pool Payouts explained: PPS vs. FPPS vs. PPLNS vs. PPS+
What is a Mining Pool?
Mining Pools
A Mining pools is a hub where a group of Crypto currency miners share their processing power to the network in order to solve the blocks quicker.
The rewards will be split equally based on the amount of shares that they contributed in finding a block.
Pool mining was introduced during early Bitcoin mining days when solo mining became non-viable.
The more powerful your hardware is, the more shares you’ll submit, the more shares you submit, the more you’ll earn.
In order for the pool to pay its miners each pool uses its own payment scheme. Two of the most popular option is PPS and PPLNS.
Pay-Per-Share (PPS)Pay-Per-Last-N-Shares (PPLNS)
The first thing a miner has to decide is which pool mining payout is best for their requirements.
PROP (proportional), FPPS (Full Pay Per Share), SMPPS (Shared Maximum Pay Per Share), ESMPPS (Equalized Shared Maximum Pay Per Share), CPPSRB (Capped Pay Per Share with Recent Backpay), PPS (Pay Per Share), PPLNS (Pay Per Last N Share) and lastly PPS+ (Pay Per Share Plus).
Among them PPS and PPLNS are the two types of payment models that are mostly used by mining pools currently. Before we explain both PPS and PPLNS we’ll make a short note on mining pool.
There are numerous payment systems (over 15), but the vast majority of the pools operate on a PPS, FPPS, PPS+ and PPLNSbasis.
However, before trying to understand the different settlement models, it is important to come to a consensus on some terms used in crypto mining.
Block Reward: Block reward refers to the new coins issued by the network to miners for each successfully solved block.
Hashing Power: Hash rate is the speed at which a computer completes an operation in the cryptocurrency’s code. A higher hashrate increases a miner’s opportunity of finding the next block.
Luck: Luck, in mining, is the probability of success. Imagine that each miner is given a lottery ticket for a certain amount of hashing power they provide. If they are to provide 1 TH/s hashing power when the overall hashing power in the network is 10 TH/s, then they would receive 1 of 10 total lottery tickets. The probability of winning the lottery (in this case finding the block reward) would be 10%.
Transaction Fees: Some networks (like Bitcoin) also have substantial amounts of transaction fees rewarded to miners. These fees are the total fees paid by users of the network to execute transactions.
Pay-Per-Share (PPS)
PPS offers an instant flat payout for each share that is solved. With this payment method, a miner gets a standard payout rate for each share completed. Each share is worth a certain amount of mineable cryptocurrency.
After deducting the mining pool fees, the miners are given a fixed income every day. Therefore, under the PPS mode, the returns are relatively stable. Miners are exposed to risk here. They may not get the transaction fees.
It is ideal for low priced orders for an extended period. This model becomes lucrative during a bearish run of a particular coin.
Pay-Per-Last-N-Shares (PPLNS)
With this payout, profits will be allocated based on the number of shares miners contribute. This kind of allocation method is closely related to the block mined out. If the mining pool excavates multiple blocks in a day, the miners will have a high profit; if the mining pool is not able to mine a block during the whole day, the miner’s profit during the whole day is zero.
Notably, in the short term, the PPLNS model is highly correlated with a pool’s luck. If the luck factor of a particular mining pool decreases in the short term, the miner’s income will also decrease accordingly (the opposite case of the mining pool being lucky in the short term is possible too). However, in the long term, the luck factor tends to average out to the mean.
Hence, this model is ideal for fixing orders on a big pool that has a high chance of finding a block within the order time limit. Or a standard order which will have miners connected for a longer time.
Pay Per Share + (PPS+)
PPS+ is a blend of two modes mentioned above, PPS and PPLNS. The block reward is settled according to the PPS model. And the mining service charge /transaction fee is settled according to the PPLNS mode.
That is to say, in this mode, the miner can additionally obtain the income of part of the transaction fee based on the PPLNS payment method. This was a major drawback in the PPS model.
Full Pay Per Share (FPPS)
With this pool payout, both the block reward and the mining service charge are settled according to the theoretical profit. Calculate a standard transaction fee within a certain period and distribute it to miners according to their hash power contributions in the pool. It increases the miners’ earnings by sharing some of the transaction fees.
With the PPS and FPPS payment methods, you will get paid no matter if the pool finds a block or not. This is the most significant advantage over PPLNS. The risks and rewards are higher with the PPLNS plan.
The decision on which mining plan to choose from needs to be preceded by the decision of choosing the right mining infrastructure.
Difference between PPS vs PPLNS payment models?
PPLNS
PPLNS stands for Pay Per Last (luck) N Shares. This method calculates your payments based on the number of shares you submitted during a shift.
It includes shift system which is time based or by number of shares submitted by the miners on the pool.
Your pool may find blocks consistently or in overtime it may have huge variations in winning a block and that ultimately affects your payments. PPLNS greatly involves luck factor and you’ll notice huge fluctuations in your 24 hour payout.
If you maintain your mining on a single pool then your payouts will remain consistent and it only differs when new miners join or leave the pool.
PPS
Pay Per Share pays you an average of the number of shares that you contributed to the pool in finding blocks.
PPS pays you on solid rate and is more of a direct method which completely eliminates luck factor.
In PPS method regardless of the pools lucky at winning blocks you’re going to get 100% payout at the end of the day. This is because there is a standard payout set for each miners based on their hash power.
It won’t be more than 100% or less than that and with this PPS method you can easily calculate your potential earnings.
On the other hand with PPLNS payment system on average you can either get more than 100% or less than that. It is based on how lucky the pool is at finding blocks.
Should I choose PPS or PPLNS?
This is one of the common questions most miners have initially.
Should I choose Pay Per Share or Pay Per Last N Share pools?
If you are the person who don’t switch pools often then PPLNS is definitely for you as such pools are good at rewarding its loyal miners.
Pay Per Share: No matter what, if you need a fixed payouts at the end of the day to liquidate or for whatsoever reason then your choice would be PPS.
Pay Per Share works well for large mining farms who can calculate and have statistics based on their mining power.
PPS is good for large miners but really bad for pool owners as there is a guaranteed payout for work no matter if the pool hits the block or not.
For this reason and because of pool hoppers (not loyal miners of the pool) most of the mining pools have switched to PPLNS payment model.
Pay Per Last N Shares: If you are the one that is looking to accumulate and hold more coins then PPLNS is recommended.
For each block that your pool finds you’ll get a share based on your hashrate.
Unlike PPS, in PPLNS you’ll get payouts more often and in the long run you’ll be rewarded more with PPLNS than PPS.
However due to huge variance it’s really hard to calculate your mining income.
PPLNS is good for both mid-range miners and pool owners as the payouts is only based on the blocks found.
If your pool is more lucky then you’ll see payments more often. This is the reason why miners stick to a pool where there is more hash power assuming the pool finds block very often.
You can find more comparison of mining pools payment system here.
How to find out if a pool is PPS or PPLNS?
Cryptocurrency mining can be a lucrative process. However it’s very important that you find out what payment scheme your pool is using before committing your hashing power.
Most of the mining pools has this information listed on FAQ page or at payouts page. If you’re unable to find this information then the only option is to contact the pool support.
Hope the information on this page is helpful for you to decide the right mining pool.
How & Why You should Prepare Here are just a few examples of what that sort of total control may look like: Government in total control The government could not only withhold money … Continue reading CBDC’s Tyranny Is Coming→
Here is a list of 100 of the best based things: Trust is not based, and relying on trust is unbased. It is foolish to ever trust someone, because the only way to … Continue reading 100 Based things→
THE CYPHERPUNK MOVEMENT Let’s make a journey back in time to see where blockchain technology and cryptocurrencies came from. It will take us back to the CypherPunk Movement starting in the 1970’s. Cryptography … Continue reading CypherPunk Movement→
The first ever bitcoin transaction from one person to another, on 2009-01-12 at 04:30 used Pay-to-Public-Key (P2PK), when Satoshi Nakamoto sent coins to Hal Finney in Block 170. P2PK is no longer used … Continue reading Block 170 – First ever bitcoin transaction→
The Art of War (Chinese: 孫子兵法; lit. ‘Sun Tzu’s Military Method’, pinyin: Sūnzi bīngfǎ) is an ancient Chinese military treatise dating from the Late Spring and Autumn Period (roughly 5th century BC). The … Continue reading The Art of War Quotes→
On January 3rd, 2009 Satoshi Nakamoto published the Genesis Block with the first 50 Bitcoins on Sourceforge. He also left a message on the blockchain at the time, quoting the headline in the British newspaper Times:
On January 3, 2009, the minister was on the verge of bailing out the banks.
Nakamoto started writing the white paper in 2008 and published it in October of that year.
The concept of a decentralized, anonymous, trusted currency emerged after the 2008 financial crisis, which left responsibility for the banks.
Satoshi neither supports the modern banking system nor does he like partial reserve banks.
A partial reserve bank is a bank that takes deposits and issues loans or investments, but only has to reserve a fraction of its liabilities for deposits. Basically, the bank is using money that it doesn’t own.
Satoshi wants to get rid of banks and seedy middlemen whom he believes are corrupt and unreliable. As such, he created a more community-centric digital currency.
13 years later, Bitcoin is still going strong with a market cap of nearly $ 900 billion. It is currently held by billionaires, banks, celebrities, governments, and corporations. This is evidence of how far BTC has come in its brief existence.
The precarious banking situation and economic uncertainty are also in crisis again.
How & Why You should Prepare Here are just a few examples of what that sort of total control may look like: Government in total control The government could not only withhold money … Continue reading CBDC’s Tyranny Is Coming→
Here is a list of 100 of the best based things: Trust is not based, and relying on trust is unbased. It is foolish to ever trust someone, because the only way to … Continue reading 100 Based things→
THE CYPHERPUNK MOVEMENT Let’s make a journey back in time to see where blockchain technology and cryptocurrencies came from. It will take us back to the CypherPunk Movement starting in the 1970’s. Cryptography … Continue reading CypherPunk Movement→
The first ever bitcoin transaction from one person to another, on 2009-01-12 at 04:30 used Pay-to-Public-Key (P2PK), when Satoshi Nakamoto sent coins to Hal Finney in Block 170. P2PK is no longer used … Continue reading Block 170 – First ever bitcoin transaction→
The Art of War (Chinese: 孫子兵法; lit. ‘Sun Tzu’s Military Method’, pinyin: Sūnzi bīngfǎ) is an ancient Chinese military treatise dating from the Late Spring and Autumn Period (roughly 5th century BC). The … Continue reading The Art of War Quotes→
Bitcoin’s most recent halving occurred on May 11, 2020. To explain what a Bitcoin halving is, we must first explain a bit about how the Bitcoin network operates.
Bitcoin’s underlying technology, blockchain, basically consists of a collection of computers (or nodes) that run Bitcoin’s software and contain a partial or complete history of transactions occurring on its network.
Each full node, or a node containing the entire history of transactions on Bitcoin, is responsible for approving or rejecting a transaction in Bitcoin’s network.
To do that, the node conducts a series of checks to ensure that the transaction is valid. These include ensuring that the transaction contains the correct validation parameters, such as nonces, and does not exceed the required length.
A transaction occurs only after all the parties operating in Bitcoin’s network approve it within the block on which the transaction exists. After approval, the transaction is appended to the existing blockchain and broadcast to other nodes.
The blockchain serves as a pseudonymous record of transactions (i.e., its contents are visible to everyone, but it is difficult to identify transacting parties in the network). This is because the blockchain assigns encrypted addresses to each transacting party in the network. That said, even those who do not participate in the network as a node or miner can view these transactions taking place live by looking at block explorers.
More computers (or nodes) added to the blockchain increase its stability and security.
There are currently 12,035 nodes estimated to be running Bitcoin’s code. Though anyone can participate in Bitcoin’s network as a node, as long as they have enough storage to download the entire blockchain and its history of transactions, not all of them are miners.
KEY TAKEAWAYS
A Bitcoin halving event is when the reward for mining bitcoin transactions is cut in half.
This event also cuts in half Bitcoin’s inflation rate and the rate at which new bitcoins enter circulation.
Both previous halvings have correlated with intense boom and bust cycles that have ended with higher prices than prior to the event.
Bitcoin last halved on May 11, 2020, around 3 p.m. EST, resulting in a block reward of 6.25 BTC.
Bitcoin Mining
Bitcoin mining is the process by which people use their computers to participate in Bitcoin’s blockchain network as a transaction processor and validator.
Bitcoin uses a system called proof of work (PoW). This means that miners must prove they have put forth effort in processing transactions to be rewarded. This effort includes the time and energy it takes to run the computer hardware and solve complex equations.
Faster computers with certain types of hardware yield larger block rewards and some companies have designed computer chips specifically built for mining. These computers are tasked with processing Bitcoin transactions, and they are rewarded for doing so.
The term mining is not used in a literal sense but as a reference to the way precious metals are gathered.
Bitcoin miners solve mathematical problems and confirm the legitimacy of a transaction. They then add these transactions to a block and create chains of these blocks of transactions, forming the blockchain.
When a block is filled up with transactions, the miners that processed and confirmed the transactions within the block are rewarded with bitcoins.
Transactions of greater monetary value require more confirmations to ensure security. This process is called mining because the work performed to get new bitcoins out of the code is the digital equivalent to the physical work done to pull gold out of the Earth.
El Salvador made Bitcoin legal tender on June 9, 2021. It is the first country to do so. The cryptocurrency can be used for any transaction where the business can accept it. The U.S. dollar continues to be El Salvador’s primary currency.
Bitcoin Halving
After every 210,000 blocks mined, or roughly every four years, the block reward given to Bitcoin miners for processing transactions is cut in half.
This cuts in half the rate at which new bitcoins are released into circulation. This is Bitcoin’s way of using a synthetic form of inflation that halves every four years until all bitcoins are released into circulation.
This system will continue until around the year 2140.
At that point, miners will be rewarded with fees for processing transactions, which network users will pay. These fees ensure that miners still have the incentive to mine and keep the network going. The idea is that competition for these fees will cause them to remain low after the halvings are finished.
The halving is significant because it marks another drop in the rate of new Bitcoins being produced as it approaches its finite supply: the total maximum supply of bitcoins is 21 million. As of October 2021, there are about 18.85 million bitcoins already in circulation, leaving just around 2.15 million left to be released via mining rewards.
In 2009, the reward for each block in the chain mined was 50 bitcoins. After the first halving, it was 25, and then 12.5, and then it became 6.25 bitcoins per block as of May 11, 2020.
To put this in another context, imagine if the amount of gold mined out of the Earth was cut in half every four years. If gold’s value is based on its scarcity, then a “halving” of gold output every four years would theoretically drive its price higher.
Coin Metrics logarithmic chart of Bitcoin price action following halvings.
Halving Implications
These halvings reduce the rate at which new coins are created and thus lower the available amount of new supply, even as demand might increase.
This can cause some implications for investors as other assets with low or finite supply, like gold, can have high demand and push prices higher.
In the past, these Bitcoin halvings have correlated with massive surges in Bitcoin’s price.
The first halving, which occurred on Nov. 28, 2012, saw an increase from $12 to $1,217 on Nov. 28, 2013.
The second Bitcoin halving occurred on July 9, 2016. The price at that halving was $647, and by Dec. 17, 2017, a bitcoin’s price had soared to $19,800. The price then fell over the course of a year from this peak down to $3,276 on Dec. 17, 2018, a price 506% higher than its pre-halving price.
The most recent halving occurred on May 11, 2020. On that date, a bitcoin’s price was $8,787. On April 14, 2021, a bitcoin’s price soared to $64,507 (an astonishing 634% increase from its pre-halving price). A month later, on May 11, 2021, a bitcoin’s price was $54,276, representing a 517% increase that seems more consistent with the behavior of the 2016 halving.
On May 12, 2021, Elon Musk, CEO of Tesla, announced that Tesla would no longer accept Bitcoin as payment, resulting in further price fluctuations.
In the week that followed Musk’s statements, the price of a bitcoin plunged below $40,000 after Chinese regulators announced restrictions banning financial institutions and payment companies from providing cryptocurrency-related services.
Though these two announcements may have temporarily created a price drop in Bitcoin, there is the potential that the price fluctuations are more related to the halving behavior we have observed previously.
The theory of the halving and the chain reaction that it sets off works something like this:
The reward is halved → half the inflation → lower available supply → higher demand → higher price → miners incentive still remains, regardless of smaller rewards, as the value of Bitcoin is increased in the process
In the event that a halving does not increase demand and price, then miners would have no incentive. The reward for completing transactions would be smaller, and the value of Bitcoin would not be high enough.
To prevent this, Bitcoin has a process to change the difficulty it takes to get mining rewards, or in other words, the difficulty of mining a transaction.
In the event that the reward has been halved, and the value of Bitcoin has not increased, the difficulty of mining would be reduced to keep miners incentivized.
This means that the quantity of bitcoins released as a reward is still smaller, but the difficulty of processing a transaction is reduced.
This process has proved successful twice. So far, the result of these halvings has been a ballooning in price followed by a large drop.
The crashes that have followed these gains, however, have still maintained prices higher than before these halving events.
For example, as mentioned above, the 2017 to 2018 bubble saw the value of a bitcoin rise to around $20,000, only to fall to around $3,200. This is a massive drop, but a bitcoin’s price before the halving was around $650.3
Though this system has worked so far, the halving is typically surrounded by immense speculation, hype, and volatility, and how the market will react to these events in the future is unpredictable.
The third halving occurred not only during a global pandemic, but also in an environment of heightened regulatory speculation, increased institutional interest in digital assets, and celebrity hype. Given these additional factors, where Bitcoin’s price will ultimately settle in the aftermath remains unclear.
What Happens When Bitcoin Halves?
The term “halving” as it relates to Bitcoin has to do with how many Bitcoin tokens are found in a newly created block.
Back in 2009, when Bitcoin launched, each block contained 50 BTC, but this amount was set to be reduced by 50% roughly every four years.
Today, there have been three halving events, and a block now only contains 6.25 BTC.
When the next halving occurs, a block will only contain 3.125 BTC.
When Have the Halvings Occurred?
The first bitcoin halving occurred on Nov. 28, 2012, after a total of 10,500,000 BTC had been mined. The next occurred on July 9, 2016, and the latest was on May 11, 2020. The next is expected to occur in early 2024.
Why Are the Halvings Occurring Less Than Every Four Years?
The Bitcoin mining algorithm is set with a target of finding new blocks once every 10 minutes.
However, if more miners join the network and add more hashing power, the time to find blocks will decrease.
This is remedied by resetting the mining difficulty (or how hard it is for a computer to solve the mining algorithm) once every two weeks or so to restore a 10-minute target.
As the Bitcoin network has grown exponentially over the past decade, the average time to find a block has consistently remained below 10 minutes (roughly 9.5 minutes).
Does Halving Have Any Effect on the Bitcoin Price?
The price of Bitcoin has risen steadily and significantly from its launch in 2009, when it traded for mere pennies or dollars, to April 2021 when the price of one bitcoin traded for over $63,000.3
Because halving the block reward effectively doubles the cost to miners, who are essentially the producers of bitcoins, it should have a positive impact on price because producers will need to adjust their selling price to their costs.
Empirical evidence does show that Bitcoin prices tend to rise in anticipation of a halvening, often several months prior to the actual event.
What Happens When There Are No More Bitcoins Left in a Block?
Around the year 2140, the last of the 21 million bitcoins ever to be mined will have been mined.
At this point, the halving schedule will cease because there will be no more new bitcoins to be found.
Miners, however, will still be incentivized to continue validating and confirming new transactions on the blockchain because the value of transaction fees paid to miners is expected to rise into the future, the reasons being that a greater transaction volume that has fees will be attached, plus bitcoins will have a greater nominal market value.
How & Why You should Prepare Here are just a few examples of what that sort of total control may look like: Government in total control The government could not only withhold money … Continue reading CBDC’s Tyranny Is Coming→
Here is a list of 100 of the best based things: Trust is not based, and relying on trust is unbased. It is foolish to ever trust someone, because the only way to … Continue reading 100 Based things→
THE CYPHERPUNK MOVEMENT Let’s make a journey back in time to see where blockchain technology and cryptocurrencies came from. It will take us back to the CypherPunk Movement starting in the 1970’s. Cryptography … Continue reading CypherPunk Movement→
The first ever bitcoin transaction from one person to another, on 2009-01-12 at 04:30 used Pay-to-Public-Key (P2PK), when Satoshi Nakamoto sent coins to Hal Finney in Block 170. P2PK is no longer used … Continue reading Block 170 – First ever bitcoin transaction→
The Art of War (Chinese: 孫子兵法; lit. ‘Sun Tzu’s Military Method’, pinyin: Sūnzi bīngfǎ) is an ancient Chinese military treatise dating from the Late Spring and Autumn Period (roughly 5th century BC). The … Continue reading The Art of War Quotes→
Bitcoin block rewards are new bitcoins awarded to cryptocurrency miners for being the first to solve a complex math problem and creating a new block of verified bitcoin transactions.
The miners use networks of computers to do this, and every time a new block is created it is verified by all the other competing miners. Then a new math problem is introduced and the miners start over.
KEY TAKEAWAYS
A block reward refers to the number of bitcoins you get if you successfully mine a block of the currency.
The amount of the reward halves after the creation of every 210,000 blocks, or roughly every four years.
The amount is expected to hit zero around 2140.
Understanding Block Rewards
Block Reward Halving
The block reward provides an incentive for bitcoin miners to process transactions made with the cryptocurrency. Creating an immutable record of these transactions is vital for bitcoin to work as intended.
The blockchain is like a decentralized bank ledger—one that can’t be altered after being created. The miners are needed to verify the transactions and keep this ledger up to date. Block rewards, and to a lesser extent, transaction fees, are their payment for doing so.
Bitcoin was designed so that new bitcoins are created at a consistent pace. So the difficulty of the math problem is adjusted every two weeks to ensure a steady output of new bitcoins—roughly one block of transactions every 10 minutes.
Bitcoin’s Block Rewards Vs. Ethereum’s
Ethereum, bitcoin’s main competitor as a cryptocurrency, also relies on block rewards to provide incentives to miners. With Ethereum, the reward is a digital token called “ether,” which is rewarded each time a miner succeeds in providing the mathematical proof of a new block. As with bitcoin, miners are also awarded a transaction fee, known as a “gas” fee.
Unlike with bitcoin, there is no limit on the number of Ethereum ether tokens that can be created, and they are created at a much faster pace—in seconds, versus about 10 minutes. So the total number of blocks in the Ethereum chain is larger than in the bitcoin chain.
The Future of Bitcoin Block Rewards
To limit inflation, bitcoin creator Satoshi Nakamoto designed bitcoin to ultimately have only 21 million bitcoins.
This is why the size of bitcoin block rewards is halved after the creation of every 210,000 blocks, which takes around four years.
At bitcoin’s inception in 2009, each block reward was worth 50 BTC.
In May 2020, the block reward was halved a third time to 6.25 BTC.
And as of May 2021, there were already 18.7 million bitcoins in existence, or nearly 90% of the total planned supply.
Ultimately, the block reward is scheduled to reach zero around May 2140, but mining will likely no longer be profitable long before that date is reached.
As of April 2039, about 99.6% of bitcoins will already have been issued, and the block reward will be just 0.19531250 bitcoin.
Along the way, transaction fees are expected to become the primary incentive for bitcoin miners
How & Why You should Prepare Here are just a few examples of what that sort of total control may look like: Government in total control The government could not only withhold money … Continue reading CBDC’s Tyranny Is Coming→
Here is a list of 100 of the best based things: Trust is not based, and relying on trust is unbased. It is foolish to ever trust someone, because the only way to … Continue reading 100 Based things→
THE CYPHERPUNK MOVEMENT Let’s make a journey back in time to see where blockchain technology and cryptocurrencies came from. It will take us back to the CypherPunk Movement starting in the 1970’s. Cryptography … Continue reading CypherPunk Movement→
The first ever bitcoin transaction from one person to another, on 2009-01-12 at 04:30 used Pay-to-Public-Key (P2PK), when Satoshi Nakamoto sent coins to Hal Finney in Block 170. P2PK is no longer used … Continue reading Block 170 – First ever bitcoin transaction→
The Art of War (Chinese: 孫子兵法; lit. ‘Sun Tzu’s Military Method’, pinyin: Sūnzi bīngfǎ) is an ancient Chinese military treatise dating from the Late Spring and Autumn Period (roughly 5th century BC). The … Continue reading The Art of War Quotes→
If you love working from home, then you should consider starting an internet based business.
One of the businesses that you can easily start at home with a computer and mining rigs is bitcoin mining.
Simply put, bitcoin is a digital currency that operates independently of any country’s central bank. In order to get an updated value of the worth of a bitcoin, you can make use of Google’s currency converter; it is a reliable platform to know the value of bitcoin each time.
If you are interested in mining bitcoin, then you have two options to follow.
You can choose to mine a block of bitcoins from the computer or you can choose to pool.
If you want quick returns on your investment, then joining a pool is your best option because mining a block of bitcoins from your computer may take you a month or more before you get any return on your investment.
Please note that if you join a pool, you will only get smaller payments, but you can be rest assured that you will get them at a regular basis.
Starting a bitcoin mining business can be rewarding but you would have to compete with other well established bitcoin miners on the World Wide Web. The fact that you will be competing with people from all over the globe is enough reason for you to be result oriented and at the same be creative with your bitcoin mining business.
So, if you have done the required online or offline bitcoin mining related courses, then you might want to venture into this business.
Starting a Bitcoin Mining Business – A Complete Guide
Industry Overview
Bitcoin mining in its simplest term is the practice of adding transaction records to Bitcoin’s public ledger of previous transactions or block chain.
This ledger of previous transactions is called the block chain as it is a chain of blocks. The block chain serves to confirm transactions to the rest of the network as having taken place.
As a matter of fact, Bitcoin miners help keep the Bitcoin network secure by approving transactions.
Mining is indeed an important and integral part of Bitcoin that ensures fairness while keeping the Bitcoin network stable, safe and highly secured.
Bitcoin mining as the name implies is similar to the mining of other commodities: it requires deliberate and calculated effort and it slowly makes new currency available at a rate that looks like the rate at which commodities like gold and copper et al are mined from the ground. Mining is also a mechanism used to introduce Bitcoins into the system.
Bitcoin is a type of digital currency that is created and held electronically; it is a cryptocurrency and a digital payment system that is invented by an unknown programmer, or perhaps a group of programmers. No one controls it.
Unlike Dollars, Euros, Pounds and other currencies, bitcoins are not printed, they are produced by people and businesses running computers all around the world, using software that solves mathematical problems.
If you want to start mining bitcoin, you would need an online wallet where your bitcoins will be stored.
There are several wallet options available online for bitcoin mining. The rule of thumb to follow before choosing an online wallet for your bitcoin mining is to choose a wallet that will allow you save bitcoins, buy bitcoins, use bitcoins and also accept bitcoins as a means of payment.
The Bitcoin (cryptocurrency and a digital payment system) industry is indeed a large internet based industry and pretty much active in countries such as United States of America, United Kingdom, France, Italy, Nigeria, Sweden, Australia, Japan, China, Germany, and Canada et al.
Despite the fact that the bitcoin mining business is still much of a green business, the business will continue to blossom because more and more users will embrace the use of bitcoins in the nearest future.
So, if you have an entrepreneurial mentality and you wish to join a massive technological revolution, you can start your own bitcoin mining business.
The truth is that you can build a bitcoin mining business even if you are not too ICT savvy and have limited capital to invest in software development and infrastructure, as long as you have internet access and you know how to use the internet.
Some of the factors that encourage entrepreneurs to start their own bitcoin mining business could be that the business is easy to set up and the startup capital is indeed affordable; you can actually start your own bitcoin mining business from the comfort of your house.
All you need to do is to create an office somewhere in your house. You don’t necessarily need to see the people you are doing business with since you can transact bitcoin mining business with clients from any part of the world.
Lastly, starting a bitcoin mining business requires professionalism, advanced mathematics skills and a good grasp of how cryptocurrency and the digital payment system works on a global platform.
Besides, you would need to get the required certifications and license and also meet the required standard for such business before you can be allowed to start a bitcoin mining business in the United States.
Starting a Bitcoin Mining Business – Market Research and Feasibility Studies
Demographics and Psychographics
The demographic and psychographic composition of those who require the services of bitcoin miners are not restricted to bitcoin exchange and trading companies and bitcoin traders, people and organizations that make online transactions in your immediate community or state, but it cuts across people on the cyber space who make use of bitcoins from all over the world.
This is so because bitcoin is a cryptocurrency and a digital payment system used basically on the internet hence the leverage to work for people and organization all across the globe.
So, if you are looking towards defining the demographics of your bitcoin mining business, you should make it all encompassing. It should include bitcoin exchange and trading companies and bitcoin traders, programmers, investors, and internet – business oriented people and organizations within and outside the United States.
List of Niche ideas Within the Bitcoin Mining Business That You Can Specialize in
Most bitcoin mining companies tend to operate the general bitcoin mining business that a standard bitcoin mining poll/company is expected to offer, that is why it seems like there are no niche areas in the industry.
But on the other hand, some bitcoin mining company may decide to major in some key areas such as:
Bitcoin cloud mining
Bitcoin cloud hashing
Providing other related bitcoin, cryptocurrency and digital payment system consulting and advisory services
The Level of Competition in the Bitcoin Mining Services Industry
The level of competition in the cryptocurrency and a digital payment system industry does not in any way depend on the location of the business since most people that mine bitcoin can operate from any part of the world and still effectively compete in the bitcoin mining line of business cum cryptocurrency and a digital payment system industry.
When it comes to bitcoin mining, distance is never a barrier when competing for clients especially international clients.
What most clients want is result, hence they are ready to make use of bitcoin miners or bitcoin mining platforms no matter the part of the world they operate from as long as they have good track record and can deliver excellent results when it comes to mining and selling bitcoins to them.
There are several bitcoin miners and bitcoin mining pools scattered all around the United States and in the cyber space.
So, if you choose to start your own bitcoin mining company in the United States, you will definitely meet stiffer competitions not only amongst bitcoin mining companies in the United States, but also all over the globe especially if you choose to specialize in cryptocurrency and digital payment system.
List of Well – Known Brands in the Bitcoin Mining Business
In every industry, there are always brands that perform better or are better regarded by customers and the general public than others. Some of these brands are those that have been in the industry for a long time, while others are best known for the results they deliver.
These are some of the leading bitcoin mining companies (bitcoin mining pools) in the United States of America and also in the globe:
Economic Analysis
As an ICT aspiring entrepreneur who is looking for a business that requires programming and mathematics skills and perhaps minimal startup capital to start, then you can consider starting a bitcoin mining pool.
The cost of running a standard bitcoin mining pool when compared to the turnover you get can be poles apart (this is applicable when you have been able to establish your feet in the industry).
One thing is certain when it comes to the bitcoin mining business and most internet based businesses, you are sure of making profits when you successfully produce results that are measurable.
As a matter of fact, the cost of running the business from start to finish could be restricted to the cost of making phone calls, transportation and internet subscriptions, PR and of course bitcoin mining and hashing hardware and software et al.
Starting Your Bitcoin Mining Company from Scratch vs Buying a Franchise
When it comes to starting a business of this nature, it will pay you to start from the scratch as against buying a franchise.
First and foremost, it is your ability to mine or hash bitcoin that matters not a brand name.
Except you want to join a well-established bitcoin mining pool that fits into your business ideology.
Unfortunately, you can hardly find a franchise of a bitcoin mining pool – company to purchase meaning that if you want to own a bitcoin mining (pool) business, then you must be ready to start from the scratch.
This is so because the business is easy to start if you have the required expertise and it is still pretty much thriving and there are loads of opportunities available to aspiring entrepreneurs that are interested in the industry.
The truth is that it will pay you to start your bitcoin mining company from the scratch. Starting from the scratch will afford you the opportunity to conduct thorough market survey and feasibility studies before choosing a location to launch the business.
Please note that most of the big and successful bitcoin mining companies around started from the scratch and they were able to build a solid business brand.
Possible Threats and Challenges You Will Face When Starting a Bitcoin Mining Business
If you decide to start your own bitcoin mining business today, one of the major challenges you are likely going to face is the presence of well – established bitcoin mining companies who are offering same services that you intend offering. The only way to avoid this challenge is to create your own market.
Some other threats that you are likely going to face as a bitcoin mining company operating in the United States are hosting issues, installation or upkeep troubles, heat, unfavorable government policies, and global economic downturn which usually affects purchasing/spending power. There is hardly anything you can do as regards these threats other than to be optimistic that things will continue to work for your good.
Starting a Bitcoin Mining Business – Legal Matters
Best legal entity to use for this type of business
Generally, you have the options of either choosing a general partnership, limited liability company which is commonly called an LLC, or a sole proprietorship for a business such as a bitcoin mining company.
Ordinarily, general partnership should have been the ideal business structure for a small – scale bitcoin mining business especially if you are just starting out with moderate startup capital.
But people prefer limited liability Company for obvious reasons. As a matter of fact, if your intention is to grow the business and have clients both corporate and individual from all across the United States of America and other countries of the world, then choosing general partnership is not an option for you. Limited Liability Company, LLC will be highly suitable for you.
Setting up an LLC protects you from personal liability. If anything goes wrong in the business, it is only the money that you invested into the limited liability company that will be at risk. It is not so for sole proprietorships and general partnerships. Limited liability companies are simpler and more flexible to operate and you don’t need a board of directors, shareholders meetings and other managerial formalities.
These are some of the factors you should consider before choosing a legal entity for your bitcoin mining (pool) business; limitation of personal liability, ease of transferability, admission of new owners, investors’ expectation and of course taxes.
If you take your time to critically study the various legal entities to use for your bitcoin mining business, you will agree that limited liability company; an LLC is most suitable. You can start this type of business as limited liability company (LLC) and in future convert it to a ‘C’ corporation or an ‘S’ corporation especially when you have the plans of going public.
Catchy Business Name ideas Suitable for a Bitcoin Mining Company
Generally, when it comes to choosing a name for a business, it is expected that you should be creative because whatever name you choose for your business will go a long way to create a perception of what the business represents. Usually it is the norm for people to follow the trend in the industry they intend operating from when naming their business.
Insurance Policies
In the United States and in most countries of the world, you can’t operate a business without having some of the basic insurance policy covers that are required by the industry you want to operate from. So, it is imperative to create a budget for insurance policy covers and perhaps consult an insurance broker to guide you in choosing the best and most appropriate insurance policies for your bitcoin mining business.
Here are some of the basic insurance policy covers that you should consider purchasing if you want to start your own bitcoin mining business in the United States of America:
General insurance
Health insurance
Liability insurance
Workers compensation
Overhead expense disability insurance
Business owner’s policy group insurance
Payment protection insurance
Intellectual Property Protection/Trademark
If you are considering starting your own bitcoin mining business, usually you may not have any need to file for intellectual property protection/trademark. This is so because the nature of the business makes it possible for you to successfully run the business without having any cause to challenge anybody in court for illegally making use of your company’s intellectual properties.
Is Professional Certification Needed to Run a Bitcoin Mining Business?
Apart from the results you produce, professional certification is one of the main reasons why most bitcoin mining companies stand out.
If you want to make an impact in the Bitcoin industry, you should work towards acquiring all the needed certifications in your area of specialization.
Certification validates your competency and shows that you are highly skilled, committed to your career, and up-to-date in this competitive market.
These are some of the certifications you can work towards achieving if you want to run your own bitcoin mining company:
Certified Bitcoin Professional (CBP) | Crypto Currency Certification
Blockcerts Certification
Cryptocurrency certification
Ethereum certification
Blockchain professional certification
List of Legal Documents You Need to Run a Bitcoin Mining Company
These are some of the basic legal documents that you are expected to have in place if you want to legally run your own bitcoin mining business in the United States of America:
Certificate of Incorporation
Business License and Certification
Business Plan
Non – disclosure Agreement
Employment Agreement (offer letters)
Operating Agreement for LLCs
Insurance Policy
Contract documents
Online Privacy Policy Document (basically for online payment portal)
Company Bylaws
Memorandum of Understanding (MoU)
Apostille (for those who intend operating beyond the United States of America)
Financing Your Bitcoin Mining Company
Aside from the amount required to purchase bitcoin mining software and hardware, bitcoins and of course cryptocurrency and other forms of digital payment required to trade with, starting a bitcoin mining business can be cost effective especially if you choose to run the business from your home, share office space with a friend or make use of a virtual office.
Securing a standard office is part of what will consume a large chunk of your startup capital, but if you choose to start the business on a small scale, you may not have the need to go source for fund to finance the business.
When it comes to financing a business, one of the major factors that you should consider is to write a good business plan.
If you have a good and workable business plan document in place, you may not have to labor yourself before convincing your bank, investors and your friends to invest in your business.
Here are some of the options you can explore when sourcing for start – up capital for your bitcoin mining/trading business:
Raising money from personal savings and sale of personal stocks and properties
Sell of shares to interested investors
Pitching your business idea and applying for business grants and seed funding from donor organizations and angel investors
Source for soft loans from your family members and your friends
Choosing a Suitable Location for your Bitcoin Mining Business
Bitcoin mining business and most internet service based type of businesses do not require that you see physically with your clients, hence the location you chose does not necessarily need to be top-notch.
But the fact that you can operate your bitcoin mining business from your home does not mean that location has little influence on the success of a bitcoin mining company.
If you have taken your time to study the bitcoin mining and other internet based businesses, you will realize that they are willing to pay expensive rents in order to stay in an ICT hub; a place with pretty strong internet network and of course a place where ICT activities are at its peak.
It is important to note that a business facility in a good location does not come cheap hence you should be able to allocate enough fund for leasing/renting in your budget.
If you are new to the dynamics of choosing a location for a business such as bitcoin mining business, then you should feel free to talk to a business consultant or a realtor who has a full grasp of the city and perhaps country you intend starting your company.
So, if you are looking for a location for your bitcoin mining company, ensure that it is a place that is located in an ICT hub; a place with pretty strong internet network and of course a place where ICT activities are at its peak.
Of course, you would not want to locate this type of business in the outskirts of town or a place without strong internet network. Your clients should be able to drive down and locate your office with little or no difficulty.
Starting a Bitcoin Mining Business – Technical and Manpower Details
In order to successfully launch a bitcoin mining business, you will definitely need bitcoin mining software apps and hardware such as Application-specific integrated circuit (ASIC) machines and other cryptocurrency and digital payment system related software apps and wallet.
So also, you will need computers, internet facility, telephone, fax machine and office furniture (chairs, tables, and shelves).
When it comes to choosing between renting and leasing an office space, the size of the bitcoin mining company you want to build, and your entire budget for the business should influence your choice.
If you have enough capital to run a standard bitcoin mining company, then you should consider the option of leasing a facility for your office.
As regards the number of employees that you are expected to kick start the business with, you would need to consider your finance before making the decision.
Averagely, you would need a Chief Executive Officer or President (you can occupy this role), an Admin and Human Resource Manager, Bitcoin Miners and Hashers, Programmers and Software Developers, Business Development Executive/marketing Executive, Customer Service Officer or Front Desk Officer, and Accountant.
Over and above, you would need a minimum of 8 key staff to effectively run a medium scale but standard bitcoin mining company.
Please note that there will be times when you are expected to go out of your way to hire experts to help you handle some high – profile internet based currency consultancy contracts especially from big corporations.
If you are just starting out, you may not have the financial capacity or required business structure to retain all the professionals that are expected to work with you which is why you should make plans to partner with other programmers and software app developers and computer engineers that operates as freelancers.
The Service Delivery Process of a Bitcoin Mining Company
It is the tradition in the cryptocurrency industry for bitcoin miners to help keep the Bitcoin network secure by approving transactions.
The truth is that mining is an important and integral part of Bitcoin that ensures fairness while keeping the Bitcoin network stable, safe and secure.
In the cryptocurrency and other forms of digital payment system industry, bitcoin miners use special software to solve math problems and are issued a certain number of bitcoins in exchange. This provides a smart process of issuing the currency and also creates an incentive for more people to mine.
For instance, when a block is discovered, the miners are rewarded a certain number of bitcoins, which is agreed-upon by everyone in the network.
Currently the reward is 6.25 bitcoins and this value will halve every 210,000 blocks.
Additionally, the bitcoin miner is awarded the fees paid by users sending transactions. The fee is an incentive for the bitcoin miner to include the transaction in their block.
It is important to state that a bitcoin mining (pool) company may decide to improvise or adopt any business process and structure that will guarantee them efficiency and flexibility; the above stated business cum services process is not cast on stone.
Starting a Bitcoin Mining Business – The Marketing Plan
Marketing ideas and strategies
As a bitcoin mining company, you would have to prove your worth over and over again before you can be awarded any bitcoin mining and hashing contracts from corporate clients.
So, if you have plans to start your own bitcoin mining company, it will pay you to first build a successful career in the digital payment system industry.
People and organizations will hire your services to help them handle all their bitcoin mining and hashing needs if they know that they are going to get good returns on their investment.
So, when you are drafting your marketing plans and strategies for your bitcoin mining company, make sure that you create a compelling personal and company profile.
Aside from your qualifications and experience, it is important to clearly state in practical terms what you have been able to achieve in time past as it relates to the cryptocurrency industry and the organizations you have worked for in time past.
This will help boost your chances in the market place when sourcing for bitcoin mining and hashing contracts.
Businesses these days are aware of the power of the internet and which is why they will do all they can to maximize the internet to market their services.
In other words, a larger percentage of your marketing efforts should be directed to internet users.
Here are some of the platforms you can utilize to market your bitcoin mining company:
Introduce your business by sending introductory letters alongside your brochure to all the bitcoin exchange and trading companies and bitcoin traders, programmers, investors, and internet – business oriented people and organizations within and outside the United States
Promptness in bidding for bitcoin mining and hashing contracts from bitcoin exchange and trading companies cum bitcoin traders, programmers, investors, and internet – business oriented people and organizations within and outside the United States
Advertise your business in relevant programming magazines, radio and TV stations (make yourself available for bitcoin mining and cryptocurrency related talk shows and interactive sessions on TV and Radio)
List your business on local directories
Attend international bitcoin mining and cryptocurrency related seminars and business fairs
Create different packages for different category of clients in order to work with their budgets
Join related associations around you with the main aim of networking and marketing your services; you are likely going to get referrals from such networks
Engage the services of online marketing executives and business developers to carry out direct marketing
Factors That Will Help You Get the Right Product Pricing
Some of the key factors that will help you mine or hash bitcoin in a profitable pricing system is to ensure that you work with highly talented programmers and mathematicians in your bitcoin mining pool.
You should also ensure that you get your bitcoin mining software and hardware at good deal not forgetting to run your maintenance as at when due.
Another strategy that will help you offer your bitcoin mining and hashing services at the right price is to ensure that you cut operational and maintenance cost to the barest minimum, and channel your efforts towards marketing and promoting your brand name.
Aside from the fact that this strategy will help you save cost, it will also help you get the right pricing for your products.
Strategies to Boost Your Bitcoin Mining Brand Awareness and Create Your Corporate Identity
If your intention of starting a bitcoin mining company is to grow the business beyond the city where you are going to be operating from to become a national and international brand, then you must be ready to spend money on promotion and advertisement of your brand.
In promoting your brand and corporate identity, you should leverage on both print and electronic media and also social media (the internet).
As a matter of fact, it is cost effective to use the internet and social media platforms to promote your brands, besides it is pretty much effective and wide reaching.
Another strategy is to sponsor relevant programmer/ICT based programs, TV and radio programs, advertise your business in relevant magazines and newspapers. Below are the platforms you can leverage on to boost your brand and to promote and advertise your business.
Place adverts on ICT magazines and related newspapers, radio and TV stations
Encourage the use of word of mouth publicity from your loyal customers
Leverage on the internet and social media platforms like YouTube, Instagram, Facebook, Twitter, LinkedIn, Snapchat, Badoo, Google+ and other platforms to promote your business
Ensure that you position your banners and billboards in strategic positions all around your city
Distribute your fliers and handbills in target areas in and around our neighborhood
Contact bitcoin exchange and trading companies cum bitcoin traders, programmers, investors, and internet – business oriented people and organization within and outside the United States by calling them up and informing them of your organization and the bitcoin mining and hashing services you offer
Advertise your business in your official website and employ strategies that will help you pull traffic to the site
Brand all your official cars and ensure that all your staff members wear your branded shirt or cap at regular intervals.
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If so, please consider a donation to help the evolution and development of more helpful articles in the future, and show your support for alternative articles.
How & Why You should Prepare Here are just a few examples of what that sort of total control may look like: Government in total control The government could not only withhold money … Continue reading CBDC’s Tyranny Is Coming→
Here is a list of 100 of the best based things: Trust is not based, and relying on trust is unbased. It is foolish to ever trust someone, because the only way to … Continue reading 100 Based things→
THE CYPHERPUNK MOVEMENT Let’s make a journey back in time to see where blockchain technology and cryptocurrencies came from. It will take us back to the CypherPunk Movement starting in the 1970’s. Cryptography … Continue reading CypherPunk Movement→
The first ever bitcoin transaction from one person to another, on 2009-01-12 at 04:30 used Pay-to-Public-Key (P2PK), when Satoshi Nakamoto sent coins to Hal Finney in Block 170. P2PK is no longer used … Continue reading Block 170 – First ever bitcoin transaction→
The Art of War (Chinese: 孫子兵法; lit. ‘Sun Tzu’s Military Method’, pinyin: Sūnzi bīngfǎ) is an ancient Chinese military treatise dating from the Late Spring and Autumn Period (roughly 5th century BC). The … Continue reading The Art of War Quotes→
How can I calculate how many hashes I generate per second?
I have a function which generates hashes from a string:
string GenerateHash(string plainText);
I generate as many hashes as possible with 4 threads.
How do I calculate how many hashes (or megahashes) I generate per second?
Your problem breaks down nicely into 3 separate tasks
Sharing a single count variable across threads
Benchmarking thread completion time
Calculating hashes per/second
Sharing a single count variable across threads
public static class GlobalCounter { public static int Value { get; private set; } public static void Increment() { Value =GetNextValue(Value); } private static int GetNextValue(int curValue) { returnInterlocked.Increment(ref curValue); } public static void Reset() { Value = 0; } }
Before you spin off the threads call GlobalCounter.Reset and then in each thread (after each successful hash) you would call GlobalCounter.Increment – using Interlocked.X performs atomic operations of Value in a thread-safe manner, it’s also much faster than lock.
Parallel.ForEach will block until all threads have finished
Calculating hashes per second
... sw.Stop(); var hashesPerSecond = GlobalCounter.Value / sw.Elapsed.Seconds;
Did you find this article helpful?
If so, please consider a donation to help the evolution and development of more helpful articles in the future, and show your support for alternative articles.
How & Why You should Prepare Here are just a few examples of what that sort of total control may look like: Government in total control The government could not only withhold money whenever they deemed … Continue reading CBDC’s Tyranny Is Coming→
Here is a list of 100 of the best based things: Trust is not based, and relying on trust is unbased. It is foolish to ever trust someone, because the only way to truly ensure that … Continue reading 100 Based things→
THE CYPHERPUNK MOVEMENT Let’s make a journey back in time to see where blockchain technology and cryptocurrencies came from. It will take us back to the CypherPunk Movement starting in the 1970’s. Cryptography for the People … Continue reading CypherPunk Movement→
The first ever bitcoin transaction from one person to another, on 2009-01-12 at 04:30 used Pay-to-Public-Key (P2PK), when Satoshi Nakamoto sent coins to Hal Finney in Block 170. P2PK is no longer used because it is … Continue reading Block 170 – First ever bitcoin transaction→
The Art of War (Chinese: 孫子兵法; lit. ‘Sun Tzu’s Military Method’, pinyin: Sūnzi bīngfǎ) is an ancient Chinese military treatise dating from the Late Spring and Autumn Period (roughly 5th century BC). The work, which is … Continue reading The Art of War Quotes→
“ It might make sense just to get some in case it catches on.
If enough people think the same way, that becomes a self fulfilling prophecy.
Once it gets bootstrapped, there are so many applications if you could effortlessly pay a few cents to a website as easily as dropping coins in a vending machine. ”
Get some in case it catches on
“ In this sense, it’s more typical of a precious metal.
Instead of the supply changing to keep the value the same, the supply is predetermined and the value changes.
As the number of users grows, the value per coin increases.
It has the potential for a positive feedback loop; as users increase, the value goes up, which could attract more users to take advantage of the increasing value. ”
Potential for a positive feedback loop
“ Maybe it could get an initial value circularly as you’ve suggested, by people foreseeing its potential usefulness for exchange. (I would definitely want some)
Maybe collectors, any random reason could spark it.
I think the traditional qualifications for money were written with the assumption that there are so many competing objects in the world that are scarce, an object with the automatic bootstrap of intrinsic value will surely win out over those without intrinsic value.
But if there were nothing in the world with intrinsic value that could be used as money, only scarce but no intrinsic value, I think people would still take up something. (I’m using the word scarce here to only mean limited potential supply) ”
“ A rational market price for something that is expected to increase in value will already reflect the present value of the expected future increases. “
Rational market price
” In your head, you do a probability estimate balancing the odds that it keeps increasing. ”
Probability
“ I’m sure that in 20 years there will either be very large transaction volume or no volume. ”
In 20 Years
“ Bitcoins have no dividend or potential future dividend, therefore not like a stock.
More like a collectible or commodity.“
Collectible vs Commodity
” [Lengthy exposition of vulnerability of a systm to use-of-force monopolies ellided.]
You will not find a solution to political problems in cryptography.
Yes, but we can win a major battle in the arms race and gain a new territory of freedom for several years.
Governments are good at cutting off the heads of a centrally controlled networks like Napster, but pure P2P networks like Gnutella and Tor seem to be holding their own. “
Pure P2P networks
” It’s very attractive to the libertarian viewpoint if we can explain it properly.
I’m better with code than with words though. “
Libertarian Viewpoint
” The proof-of-work is a Hashcash style SHA-256 collision finding.
It’s a memoryless process where you do millions of hashes a second, with a small chance of finding one each time.
The 3 or 4 fastest nodes’ dominance would only be proportional to their share of the total CPU power.
Anyone’s chance of finding a solution at any time is proportional to their CPU power.
There will be transaction fees, so nodes will have an incentive to receive and include all the transactions they can.
Nodes will eventually be compensated by transaction fees alone when the total coins created hits the pre-determined ceiling. “
Transactions Fees
” Right, it’s ECC digital signatures.
A new key pair is used for every transaction.
It’s not pseudonymous in the sense of nyms identifying people, but it is at least a little pseudonymous in that the next action on a coin can be identified as being from the owner of that coin.”
Pseudonymous
Bitcoin is a new electronic cash system that uses a peer-to-peer network to prevent double-spending.
It’s completely decentralized with no server or central authority
New electronic cash system
Total circulation will be 21,000,000 coins.
It’ll be distributed to network nodes when they make blocks, with the amount cut in half every 4 years
first 4 years: 10,500,000 coins
next 4 years: 5,250,000 coins
next 4 years: 2,625,000 coins
next 4 years: 1,312,500 coins etc…
When that runs out, the system can support transaction fees if needed.
It’s based on open market competition, and there will probably always be nodes willing to process transactions for free.
Open Market Competition
” I would be surprised if 10 years from now we’re not using electronic currency in some way, now that we know a way to do it that won’t inevitably get dumbed down when the trusted third party gets cold feet.
It could get started in a narrow niche like reward points, donation tokens, currency for a game or micropayments for adult sites.
Initially it can be used in proof-of-work applications for services that could almost be free but not quite.
POW applications
It can already be used for pay-to-send e-mail.
The send dialog is resizeable and you can enter as long of a message as you like.
It’s sent directly when it connects.
The recipient doubleclicks on the transaction to see the full message.
If someone famous is getting more e-mail than they can read, but would still like to have a way for fans to contact them, they could set up Bitcoin and give out the IP address on their website. “
Pay-to-Send Email
“Send X bitcoins to my priority hotline at this IP and I’ll read the message personally.”
Send bitcoin
You can securely control neither your land nor your digitally centralized financial assets without the help of government. Thus the locality & importance of legal ownership in these things. You can securely control your globally seamless Bitcoin without the help of government.
Nick Szabo
From the People For the People !!! Be your Own Bank !!! REVOLUTIONARYIMMUTABLE PUBLIC COLLABORATIVE OPEN RESISTANT DECENTRALIZED
Made with 💚 by Free Spirit
✌ & 💚
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BitHouse 