BCBusiness

Y ou probably know that mining bitcoin and other crypto- currencies doesn't involve picks, shovels and real coins, but did you ever wonder how it works? For a firsthand account, we turned to Kunal Kumar and Joe Thomas, workshop lead and director of research, respectively, at Blockchain @uBC.Students. In cryptocurrency parlance, mining means using computer power to secure and verify transactions to the blockchain, which Thomas describes as a giant list of interlinked blocks of data. Mining preserves the order of transactions, explains the undergraduate research assistant at the Sauder School of Business. Let's say someone tried to use the same $100 to pay their dentist and their landlord. "Which one of those is legitimate?" Thomas asks. "Mining ensures that there's only one true history." Most cryptocurrencies oper- ate at a scheduled inflation rate, with fees for each transaction offering miners an extra incen- tive, Kumar says. In bitcoin's case, people usually work together to mine a block by solving the math- ematical puzzle it presents. Each miner's computer works at its own hash rate, a measure of calculations per second, incre- menting a random number called a nonce to arrive at a hash, or numeric code, that's less than the "target" of the block. One person gets a reward, currently 12.5 bitcoins, for completing a new block, but mining pools often split the take. "you can spend it, you can hold onto it," says Thomas of the mined coin. How to get started mining cryptocurrencies? Some people use a computer with a graphics card, says Kumar, an arts student who plans to major in political science. Making the task easier is software such as niceHash, a "one-click miner" that gives your computer a preset profile. On the pricier side, there are application- specific integrated circuit (ASIC) miners dedicated to certain currencies. used by commercial mining operations in Metro Vancouver and elsewhere, these devices are loud and power- hungry, Kumar warns. Setup can take time, but a crypto miner is low-maintenance once it's running, Kumar says. Tending to it won't take more than 10 to 20 minutes a day, he estimates. That isn't enough for him: "I spend a lot of time on it because my game plan is to look for coins that I believe will increase in value over time." But there's no guarantee that mining will pay for itself, admits Kumar, who says his return on investment has fluctuated from 0.2 percent to 1 percent per day this year. Having many people min- ing keeps the blockchain stable, but it can also shrink individual rewards. For example, Kumar says, 10 people mining a coin worth $10 at the same rate might each get $1. "But if there's still $10 being mined but now there's 100 people mining that same currency, each of us is only going to get 10 cents probably." –Nick Rockel Digging Deep: A Cryptocurrency Mining primer We take a look below the surface of this growing industry MAy 2018 BCBusiness 31 Bitcoin Mining Transaction pool create block >>>>>>>>> 2016th block since last readjustment? Block accepted by all nodes is hash < target ? Proof-of-work incentive: new bitcoins Existing blockchain increment nonce Add new block to blockchain calculate hash of block header YES no no YES if any other miner creates valid block, process restarts Readjust difficulty to ensure it takes 10 minutes on average to create a block new block created no YES KIRAn VAIDyA MAy 2018 BCBusiness 31

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