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drusselloctal@gmail.com 2014-11-01 14:43:05 -07:00
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@ -795,7 +795,7 @@ Since 2012, bitcoin mining has evolved to resolve a fundamental limitation in th
In this highly competitive environment, individual miners working alone (also known as solo miners) don't stand a chance. The likelihood of them finding a block to offset their electricity and hardware costs is so low that it represents a gamble, like playing the lottery. Even the fastest consumer ASIC mining system cannot keep up with commercial systems that stack tens of thousands of these chips in giant warehouses near hydro-electric power stations. Miners now collaborate to form mining pools, pooling their hashing power and sharing the reward among thousands of participants. By participating in a pool, miners get a smaller share of the overall reward, but typically get rewarded every day, reducing uncertainty.
Let's look at a specific example. Assume a miner has purchased mining hardware with a combined hashing rate of 6,000 giga-hashes per second (GH/s) or 6 TH/s. In August of 2014 this equipment costs approximately $10,000 USD. The hardware also consumes 3 kilowatts (kW) of electricity when running, 72 kW-hours a day, at a cost of $7 or $8 per day on average. At current bitcoin difficulty, the miner will be able to solo-mine a block approximately once every 155 days, or every 5 months. If the miner does find a single block in that timeframe, the payout of 25 bitcoin, at approximately $600 per bitcoin will result in a single payout of $15,000, which will cover the entire cost of the hardware and the electricity consumed over the time period, leaving a net profit of approximately $3,000. However, the chance of finding a block in a 5-month period depends on the miner's luck. He might find two blocks in 5 months and make a very large profit. Or He might not find a block for 10 months and suffer a financial loss. Even worse, the difficulty of the bitcoin Proof-Of-Work algorithm is likely to go up significantly over that period, at the current rate of growth of hashing power, meaning the miner has at most 6 months to break even before the hardware is effectively obsolete and must be replaced by more powerful mining hardware. If this miner participates in a mining pool, instead of waiting for a once-in-5-month $15,000 windfall, he will be able to earn approximately $500 to $750 per week. The regular payouts from a mining pool will help him amortize the cost of hardware and electricity over time without taking an enormous risk. The hardware will still be obsolete in six to nine months and the risk is still high, but the revenue is at least regular and reliable over that period.
Let's look at a specific example. Assume a miner has purchased mining hardware with a combined hashing rate of 6,000 giga-hashes per second (GH/s) or 6 TH/s. In August of 2014 this equipment costs approximately $10,000 USD. The hardware also consumes 3 kilowatts (kW) of electricity when running, 72 kW-hours a day, at a cost of $7 or $8 per day on average. At current bitcoin difficulty, the miner will be able to solo-mine a block approximately once every 155 days, or every 5 months. If the miner does find a single block in that timeframe, the payout of 25 bitcoin, at approximately $600 per bitcoin will result in a single payout of $15,000, which will cover the entire cost of the hardware and the electricity consumed over the time period, leaving a net profit of approximately $3,000. However, the chance of finding a block in a 5-month period depends on the miner's luck. He might find two blocks in 5 months and make a very large profit. Or he might not find a block for 10 months and suffer a financial loss. Even worse, the difficulty of the bitcoin Proof-Of-Work algorithm is likely to go up significantly over that period, at the current rate of growth of hashing power, meaning the miner has at most 6 months to break even before the hardware is effectively obsolete and must be replaced by more powerful mining hardware. If this miner participates in a mining pool, instead of waiting for a once-in-5-month $15,000 windfall, he will be able to earn approximately $500 to $750 per week. The regular payouts from a mining pool will help him amortize the cost of hardware and electricity over time without taking an enormous risk. The hardware will still be obsolete in six to nine months and the risk is still high, but the revenue is at least regular and reliable over that period.
Mining pools coordinate many hundreds or thousands of miners, over specialized pool mining protocols. The individual miners configure their mining equipment to connect to a pool server, after creating an account with the pool. Their mining hardware remains connected to the pool server while mining, synchronizing their efforts with the other miners. Thus, the pool miners share the effort to mine a block and then share in the rewards.