Made changes to ch08.asciidoc

ch08.asciidoc

@@ -783,33 +783,33 @@ As the amount of hashing power applied to mining bitcoin has exploded, the diffi
 .Bitcoin's mining difficulty metric, over two years
 image::images/msbt_0808.png["BitcoinDifficulty"]
 
-In the last two years, the ASIC mining chips have become denser and denser, approaching the cutting edge of silicon fabrication with a feature size (resolution) of 22 nanometers (nm). Currently, ASIC manufacturers are aiming to overtake general purpose CPU chip manufacturers, designing chips with a feature size of 16nm, because the profitability of mining is driving this industry even faster than general computing. There are no more giant leaps left in bitcoin mining, because the industry has reached the forefront of "Moore's Law". Still, the mining power of the network continues to advance at an exponential pace as the race for higher density chips is matched with a race for higher density data centers where thousands of these chips can be deployed. It's no longer about how much mining can be done with one chip but how many chips can be squeezed into a building, while still dissipating the heat and providing adequate power.
+In the last two years, the ASIC mining chips have become denser and denser, approaching the cutting edge of silicon fabrication with a feature size (resolution) of 22 nanometers (nm). Currently, ASIC manufacturers are aiming to overtake general-purpose CPU chip manufacturers, designing chips with a feature size of 16nm, because the profitability of mining is driving this industry even faster than general computing. There are no more giant leaps left in bitcoin mining, because the industry has reached the forefront of "Moore's Law," which stipulates that computing density will double approximately every 18 months. Still, the mining power of the network continues to advance at an exponential pace as the race for higher density chips is matched with a race for higher density data centers where thousands of these chips can be deployed. It's no longer about how much mining can be done with one chip, but how many chips can be squeezed into a building, while still dissipating the heat and providing adequate power.
 
 [[extra_nonce]]
 ==== The Extra Nonce Solution
 
-Since 2012 bitcoin mining has evolved to resolve a fundamental limitation in the structure of the block header. In the early days of bitcoin, a miner could find a block by iterating through the nonce until the resulting hash was below the target. As difficulty increased, miners often cycled through all 4 billion values of the nonce without finding a block. However, this was easily resolved by updating the block timestamp to account for the elapsed time. Since the timestamp is part of the header, the change would allow miners to iterate through the values of the nonce again with different results.  Once mining hardware exceeded 4 GH/sec however, this approach became increasingly difficult as the nonce values were exhausted in less than a second. As ASIC mining equipment started pushing and then exceeding the TH/sec hash rate, the mining software needed more space for nonce values in order to find valid blocks. The timestamp could be stretched a bit, but moving it too far into the future would cause the block to become invalid. A new source of "change" was needed in the block header. The solution was to use the coinbase transaction as a source of extra nonce values. Since the coinbase script can store between 2 and 100 bytes of data, miners started using that space as extra nonce space, allowing them to explore a much larger range of block header values to find valid blocks. The coinbase transaction is included in the merkle tree, which means that any change in the coinbase script causes the merkle root to change. Eight bytes of extra nonce, plus the 4 bytes of "standard" nonce allow miners to explore a total 2^96^ (8 followed by 28 zeroes) possibilities *per second* without having to modify the timestamp. If, in the future, a miner could run through all these possibilities, they could then modify the timestamp. There is also more space in the coinbase script for future expansion of the extra nonce space.
+Since 2012, bitcoin mining has evolved to resolve a fundamental limitation in the structure of the block header. In the early days of bitcoin, a miner could find a block by iterating through the nonce until the resulting hash was below the target. As difficulty increased, miners often cycled through all 4 billion values of the nonce without finding a block. However, this was easily resolved by updating the block timestamp to account for the elapsed time. Because the timestamp is part of the header, the change would allow miners to iterate through the values of the nonce again with different results.  Once mining hardware exceeded 4 GH/sec, however, this approach became increasingly difficult because the nonce values were exhausted in less than a second. As ASIC mining equipment started pushing and then exceeding the TH/sec hash rate, the mining software needed more space for nonce values in order to find valid blocks. The timestamp could be stretched a bit, but moving it too far into the future would cause the block to become invalid. A new source of "change" was needed in the block header. The solution was to use the coinbase transaction as a source of extra nonce values. Because the coinbase script can store between 2 and 100 bytes of data, miners started using that space as extra nonce space, allowing them to explore a much larger range of block header values to find valid blocks. The coinbase transaction is included in the merkle tree, which means that any change in the coinbase script causes the merkle root to change. Eight bytes of extra nonce, plus the 4 bytes of "standard" nonce allow miners to explore a total 2^96^ (8 followed by 28 zeros) possibilities _per second_ without having to modify the timestamp. If, in the future, miners could run through all these possibilities, they could then modify the timestamp. There is also more space in the coinbase script for future expansion of the extra nonce space.
 
 [[mining_pools]]
 ==== Mining Pools
 
 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. They might find two blocks in 5 months and make a very large profit. Or they 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, they will be able to earn approximately $500 to $750 per week. The regular payouts from a mining pool will help them amortize the cost of hardware and electricity over time without taking an enormous risk. The hardware will still be obsolete in 6-9 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. 
 
 Successful blocks pay the reward to a pool bitcoin address, rather than individual miners. The pool server will periodically make payments to the miners' bitcoin addresses, once their share of the rewards has reached a certain threshold. Typically, the pool server charges a percentage fee of the rewards for providing the pool mining service.
 
-Miners participating in a pool, split the work of searching for a solution to a candidate block, earning "shares" for their mining contribution. The mining pool sets a lower difficulty target for earning a share, typically more than 1,000 times easier than the bitcoin network's difficulty. When someone in the pool successfully mines a block, the reward is earned by the pool and then shared with all miners in proportion to the number of shares they contributed to the effort. 
+Miners participating in a pool split the work of searching for a solution to a candidate block, earning "shares" for their mining contribution. The mining pool sets a lower difficulty target for earning a share, typically more than 1,000 times easier than the bitcoin network's difficulty. When someone in the pool successfully mines a block, the reward is earned by the pool and then shared with all miners in proportion to the number of shares they contributed to the effort. 
 
-Pools are open to any miner, big or small, professional or amateur. A pool will therefore have some participants with a single small mining machine, others with a garage-full of high-end mining hardware. Some will be mining with a few tens of a kilowatt of electricity, others will be running a data center consuming a megawatt of power. How does a mining pool measure the individual contributions, so as to fairly distribute the rewards, without the possibility of cheating? The answer is to use bitcoin's Proof-of-Work algorithm to measure each pool miner's contribution, but set at a lower difficulty so that even the smallest pool miners win a share frequently enough to make it worthwhile to contribute to the pool. By setting a lower difficulty for earning shares, the pool measures the amount of work done by each miner. Each time a pool miner finds a block header hash that is less than the pool difficulty, they prove they have done the hashing work to find that result. More importantly, the work to find shares contributes, in a statistically measurable way, to the overall effort to find a hash lower than the bitcoin network's target. Thousands of miners trying to find low-value hashes will eventually find one low enough to satisfy the bitcoin network target. 
+Pools are open to any miner, big or small, professional or amateur. A pool will therefore have some participants with a single small mining machine, and others with a garage-full of high-end mining hardware. Some will be mining with a few tens of a kilowatt of electricity, others will be running a data center consuming a megawatt of power. How does a mining pool measure the individual contributions, so as to fairly distribute the rewards, without the possibility of cheating? The answer is to use bitcoin's Proof-Of-Work algorithm to measure each pool miner's contribution, but set at a lower difficulty so that even the smallest pool miners win a share frequently enough to make it worthwhile to contribute to the pool. By setting a lower difficulty for earning shares, the pool measures the amount of work done by each miner. Each time a pool miner finds a block header hash that is less than the pool difficulty, she proves she has done the hashing work to find that result. More importantly, the work to find shares contributes, in a statistically measurable way, to the overall effort to find a hash lower than the bitcoin network's target. Thousands of miners trying to find low-value hashes will eventually find one low enough to satisfy the bitcoin network target. 
 
-Let's return to the analogy of a dice game. If the dice players are throwing dice with a goal of throwing less than four (the overall network difficulty), a pool would set an easier target, counting how many times the pool players managed to throw less than eight. When a pool player throws less than eight (the pool share target), they earn shares, but they don't win the game because they don't achieve the game target (less than four). The pool players will achieve the easier pool target much more often, earning them shares very regularly, even when they don't achieve the harder target of winning the game. Every now and then, one of the pool players will throw a combined dice throw of less than four and the pool wins. Then, the earnings can be distributed to the pool players based on the shares they earned. Even though the target of eight-or-less wasn't winning, it was a fair way to measure dice throws for the players and occasionally produces a less-than-four throw. 
+Let's return to the analogy of a dice game. If the dice players are throwing dice with a goal of throwing less than four (the overall network difficulty), a pool would set an easier target, counting how many times the pool players managed to throw less than eight. When pool players throw less than eight (the pool share target), they earn shares, but they don't win the game because they don't achieve the game target (less than four). The pool players will achieve the easier pool target much more often, earning them shares very regularly, even when they don't achieve the harder target of winning the game. Every now and then, one of the pool players will throw a combined dice throw of less than four and the pool wins. Then, the earnings can be distributed to the pool players based on the shares they earned. Even though the target of eight-or-less wasn't winning, it was a fair way to measure dice throws for the players and occasionally produces a less-than-four throw. 
 
 Similarly, a mining pool will set a pool difficulty that will ensure that an individual pool miner can find block header hashes that are less than the pool difficulty quite often, earning shares. Every now and then, one of these attempts will produce a block header hash that is less than the bitcoin network target, making it a valid block and the whole pool wins. 
 
-===== Managed Pools
+===== Managed pools
 
 Most mining pools are "managed", meaning that there is a company or individual running a pool server. The owner of the pool server is called the _pool operator_ and they charge pool miners a percentage fee of the earnings.