First of all we must clarify that it is ‘mining Bitcoin’. Without the intention of offending the technicians and of course the unknown in the matter, we will make a simple similarity of what the Bitcoin mining process is about.
Imagine that you learned that in the yard of your house you can ‘extract’ a mineral that is 100 meters deep and that you pay very well in the market to which you trade it.
Surely you will want to start to take out that mineral to earn extra money, or hopefully depending on your time and knowledge use it as a primary income activity. But to dig 100 meters underground, you will need human resources, technicians and machinery of course.
About your investment
So you must therefore make an initial investment to extract it and gamble it to find the mineral and be able to market it in order to have a profit or gain from the activity carried out.
Depending on your investment capacity, you may have more or less extraction capacity and therefore more or less profit margins.
Bitcoin mining is something similar
Those interested in getting involved in this fascinating world, computationally and economically, require resources, time and perhaps some ‘luck’ given the volatility of market prices, to obtain an acceptable profit that allows you to recover your investment and capitalize.
Bitcoin mining basically consists of computing power, that is; each bitcoin that is found requires a complex computational calculation to solve a kind of algorithm (PoW for the Bitcoin case), which allows according to its capacity to carry a computing power (hash rate) to obtain a fraction of the current reward of 12.5 BTC per block found in the Bitcoin Blockchain.
In simple words, it means leaving a specialized computer on and dedicated exclusively all day, 24/7 iterating and solving complex algorithms to find the same solution together with other globally connected computers worldwide to obtain the reward before mentioned.
A technical point of view
From the technical point of view, the ASICs, the miners of integrated circuits for specific activities; are the equipment that can currently be acquired to get involved in Bitcoin mining. There are several models in the market and several brands in constant competition, with the exception that the Chinese giant Bitmain, is the favorite among other things; for the price-power ratio of computation (Hash Rate) offered by their devices.
For each cryptocurrency there is a specific algorithm under which its mining can be performed, many of which are derivations of Bitcoin because it is the first cryptocurrency to apply the Work Test algorithm (PoW).
Like all commercial activity, mining has its costs: energy cost, space rental, investment in equipment, human resources, among others; that at macro levels are fixed costs and invoices to be canceled regardless of what happens in the market.
Now understanding the variables and how is the mining process, recently several low profile crypts have suffered a vulnerability called the attack of 51%.
Basically, this attack takes place when 100% of the network that maintains a particular cryptocurrency (call mining, transaction verification, connected nodes, etc.) falls into the hands of malicious hands that control 51% or more of the power of computation of the network, which allows you to perform ‘false checks of transactions’ in the block chain in particular of that crypto, with the consequent double expense, which generates losses to the system.
The role of blockchain
The Blockchain as an underlying technology of Bitcoin, managed to solve the problem of double spending, that is, that a currency (such as the physical case) can not be spent twice at the same time, given the block checks carried out by the miners.
Now, if a hacker or malicious node carries out a control attack of> 51% of the power of the network, it will be able to validate false transactions with the same currency by placing it at the same time in several exchanges preferably in order to be able to validate the withdrawals / deposits and thus obtain the real resources based on fraudulent transactions.
There are various calculations for specific currencies that are considered to be vulnerable to this type of attack, given its nature of mining.
Bitcoin vs Ethereum vs Litecoin vs Monero
The list presents Bitcoin (BTC) as the cryptocurrency with the highest loss per hour before an attack of this type, with the surprising figure of $ 216 thousand dollars, based on the current difficulty and the value of the asset at the time of writing Article.
Ethereum (ETH) follows with $ 75 thousand dollars in losses per hour for an attack of this type to its network Blockchain and the third place follows Litecoin (LTC) with about $ 8 thousand dollars, Bitcoin Cash (BCH) with a little more than $ 15 thousand dollars in losses and Monero (XMR) with little more than $ 4600.
It is worth noting that the greater the difficulty, the greater the resource used for mining and therefore the greater the loss before the possibilities of an attack of this type.
Naturally, an attack on the Bitcoin network is similar to an apocalyptic event for the ecosystem because it is the most capitalized asset on the one hand, because it has an immediate collateral effect on all the cryptocurrencies that are anchored to this asset and for having the highest degree of cost for your mining.
Recall that Bitmain, the Asian giant manufacturer of ASIC to mine BTC and owner of almost 40% of the hash rate of the Bitcoin ecosystem, recently the loss by the war of hashes product of the hard fork of Bitcoin Cash; has disconnected a considerable amount of machines from the Bitcoin network that have caused a 15% decrease in the hash rate of the system and according to studies, it is estimated that the decrease in difficulty is equivalent to 1.9 million disconnected ASICs.
If each of these equipment costs around $ 2200 dollars per unit, and the network generates about $ 285 million per transaction in a day on average, it is not surprising that the losses are high enough as a result of a 51% attack.
Also published on Medium.