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23 November 2017

Everything You Should Know About Blockchain and Crypto Mining.

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The blockchain is the first native digital medium for peer-to-peer value exchange. Cryptocurrency is a type of digital money. A special blockchain dApp, which has created for anonymous and security reasons. Virtual cash is a way to make payments avoid banks and more complicated, long process.

Blockchain - fintech future?

Cryptomining is all about blockchain and cryptology. It consists of solving cryptographic signatures on powerful machines and a particular program, which helps miners compete with their peers. It is an electronic and shared ledger between users (miners). Ledger consists a time and value transactions without any personal data about consignor and consignee. In regular intervals, miners would attempt to solve a block having the transaction data using cryptographic hash functions. Hash is a numeric value of fixed length that uniquely identifies data. Blockchain could have "dAPPs" (decentralised blockchain application), and for now, cryptocurrency is the only "dAPP" which is available. The future of fintech belongs to the blockchain. Why? It will make possible to create automatic and intelligent contract generation when the project/agreement/conditions will have finished without any human activity. As a result, EU/ USA banking sector can save from 3 to 11 bln $ per year. In motor vehicle insurance industry blockchain reduce the processing data cost about 21 bln $ per year. These numbers are awe-inspiring.

The short, long story about the first cryptocurrency – Bitcoin.

The beginning of cryptocurrencies has a place under the fake nickname Satoshi Nakamoto in 2007. To this day we don't know who is he (or she/they). According to the legend, Satoshi has started working on Bitcoin in 2007. There was a speculation that Satoshi could also be a group of people. Nakamoto said that writing the base of Bitcoin takes him up about a year. In 2008, three developers: Neal Kin, Vladimir Oksman and Charles Bry submitted an exciting encryption patent application which looks and works in the same way like Bitcoin. Three days later domain bitcoin.org is registered by anonymousspeech.com. At the end of October 2008 Satoshi published white paper – "Bitcoin P2P ecash paper" which was a solution for some issues with cryptocurrency. On 2 January 2009 first block was created. It was called "Genesis block". A week later Bitcoin v0.1. was revealed. A first breakthrough moment was first bitcoin transaction after three days from Bitcoin v0.1 reviling. Nakamoto transferred bitcoin from block 170 to Hal Finney – PGP Corporation employee. It was a beginning of bitcoin which we know now.  In October 2009 New Liberty published first exchanged rate. A couple of weeks later Bitcoin v0.2 was distributed. At the beginning of 2010 appeared first exchange office -  bitcoin market. In July on Slashdot website published an article about bitcoin. In a result value of bitcoin rise tenfold.  For months from February 2010, next exchange market opened, and it is possible to exchange bitcoin for a lot of world currencies. The most exciting and essential information about bitcoin is that value depends only on demand. It is independent of speculation.

Why are GPUs so expensive right now?

Depends on which cryptocurrency you would like to mine you have to choose a type of machine that will be more or less effective. ASICs are better for Bitcoins, CPUs for Monero but GPUs for Ethereum. Nowadays, Ethereum is one of the most popular and cost-effective cryptocurrency. Miners buy a lot of GPUs designed primarily for gamers (because of GPU performances). Demand is higher than supply. GPUs market is empty, and prices are getting higher. Existing GPUs aren't powerful enough, so now miners are flocking to application-specific integrated circuits or ASICs. The most significant gamers on the GPUs market Nvidia and AMD are working on GPUs, which could be used correctly for the purpose.

A few words about mining difficulty.

There are 1315 cryptocurrencies registered on coinmarketcap.com. The number of them is increasing fast. The most valuable are Bitcoin, Ethereum, Ripple and Litecoin.  What is more interesting is that the newest is easiest to mine. Why is this happening? The mining difficulty has caused for a couple of reasons. First of all, there is a block difficulty, which forces valid blocks to have a hash below this level. The second reason is the factor of how many miners are mining on the network. With bitcoin, the mining difficulty adjusts every 2,016 blocks. Depending on how many miners were mining; their combined hash power and the time it took to find those 2,016 blocks. The difficulty is higher or lower.

Blockchain regulations

USA

In 2017, eight States have worked on the use of Bitcoin and blockchain technology. A couple of them passed that into their law. The most important developments for blockchain’s regulation and implementation in the U.S. is recognition of smart contracts in Arizona, blockchain as evidence in Vermont, real estate records in Chicago, and pending initiative authorising the registration of shares of Delaware companies in blockchain technology in Delaware. Bitcoin is getting safeguards as traditional assets. The U.S. Commodity Futures Trading Commission granted LedgerX, a cryptocurrency trading platform operator, accept to be the first regulated digital currency options exchange.

EU

In 2017, the European Union government revealed that they are working on the blockchain to support distributed ledger-based projects. According to this information, the EU is considering growing its attempts on supporting projects related to the ledger technology. The EU is monitoring DLT and Blockchain situation and is working DLT benefits and challenges for application in fintech. The official information explained that the European Commission would like to “pilot projects to foster decentralised innovation ecosystems and help reshape interactions between consumers, producers, creators and among citizens, businesses and administrations to the end benefit of society.” One of the European countries, Switzerland is getting one of the leading European hubs for cryptocurrency and blockchain technology. It is ahead by the Swiss non-profit blockchain and cryptographic technology association. They are started developing an ICO Code of Conduct.

What is next?

Blockchain offers all of what we have now but in a better, easier way. All in all, blockchain is a perfect match for fintech issue and challenges. It reduces a lot of costs and let us make an anonymous, transparency, fast and safety transaction. I know for sure, that blockchain will change our future, particularly banking and transaction future.


Author
Marek Krasnowski
Project Manager