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A Plea for Internet Decentralization

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Outline

  1. Welcome to the web!
  2. Tomorrow WLANd: Web 3.0
  3. Ethereum’s vision for the future
  4. Conclusion

Welcome to the web!

In the early days of the internet — from the 1980s through the early 2000s — digital infrastructure was predominantly decentralized by nature. Lack of adoption outside of universities and research facilities assigned the governance process to intellectuals and engineers, not special interest groups which served corporations. This period of explosive growth through democratic consensus contributed to the formation of household brands including Yahoo, Google, Amazon, and countless others. Amidst this chapter remained a strict adherence to the internet’s most accepted truths such as net neutrality and open exchange of information. As applications were still primitive enough to coexist with the network’s limited technical capacity, these views remained unchallenged. Allocation of power remained at healthy levels.

Regrettably, the acute user growth experienced towards the end of this period was not as compatible with the internet’s technical capacity. Emerging dot-coms outgrew the very decentralized infrastructure which propelled them into existence in the first place, and decentralized networks failed to keep up with consumer demand. A bottleneck had been discovered, and it didn’t take long for corporate influencers to catch on. Through identifying this weakness as a strategic opportunity to seize control of the decision-making process entirely, a new industry had formed. As user-growth exploded so did the internet’s reliance on a limited number of so-called “internet service providers” such as, and most notably, A.O.L.

The second wave of the internet — from the mid-2000s to the present — has seen the transformation of these previously mentioned household brands into indestructible titans of industry. Each group has maintained their own dominant grasp on the internet’s infrastructure through a shameful history of consequential decisions, which have at-large negatively affected the internet’s socio-economic agnosticism. By producing software and services that heavily promote centralized protocols, these groups have sacrificed well-established internet etiquette in the name of securing their dominance among competition.

Furthermore, we have seen these corporations align themselves with the interests of internet service providers through producing such centralized products to strengthen both of their respective monopolies. Recent years have seen advancements in cloud-based computing, increasing reliance on limited-capacity mobile devices, and a growing dependency on closed-source application development trends. All of which take power away from individuals while concurrently increasing user dependency on Internet Service Providers, as well as large businesses such as Google and Amazon.

Internet service providers, who advocate for such centralized approaches to maintain their control over the free flow of information across the internet, have in return shown these corporations indirect favoritism. This manifests itself through bandwidth subsidies and other forms of monetary incentives favoring centralized businesses. While this sort of favoritism has been limited through FCC oversight, the increasingly imminent repeal of net neutrality would most certainly spawn even more direct favoritism among ISPs.


Let’s pause for a minute to speak candidly. Despite all of this, plenty of good has come from the existence of these centralized internet services and providers. Exponential growth in terms of global accessibility to the internet has granted billions of individuals with access to life-altering information regardless of their social or economic standings. Access to unrestricted knowledge-bases and real-time communication protocols have also quite literally sparked revolutions in emerging nations. Nowhere is this case more noticeable than among many developing nations of the middle east, particularly those seen in the Arab spring.

Despite commendable achievements however, corporations have made it increasingly difficult for startups, creators, and other groups to achieve sustainable influence among popular digital platforms. That is, without being subjected to harsh censorship or swift replication of course. Content creators must increasingly rely on centralized platforms to distribute their message, such as YouTube, Tumblr, Spotify, and more. Often times, these channels confine creators to forms of self-expression deemed non-controversial or simply “advertiser-friendly.”

This, in turn, slows innovation to a grind by disincentivizing creative thinking and limiting personal expression to predetermined parameters. In a world where large corporations can swallow up their competition whole, why bother building anything new or innovative? In a world where art is valued based upon a lack of controversy, why create anything? In a world where your digital identity is increasingly tied to your real-life success and safety, why risk saying anything provocative?

So where’s the good news?

Tomorrow WLANd: Web 3.0

The third wave of the internet — Which currently lacks a unified hypothesis on how best to manifest itself — is commonly referred to as “Web 3.0.” Though this next wave’s future is uncertain, many argue that a return to decentralization is imperative for the preservation of free and open exchange of information around the world. Quite possibly, it may be our last opportunity to ensure a positive future where technology works to empower individual freedoms, not to suppress them. No pressure… right?

To achieve this drastic overhaul in infrastructure some experts have proposed that the increasingly popular technology behind Bitcoin and Ethereum, known as Blockchain, could be used for the foundation of the next web. What makes Blockchain so appealing is that it enables strangers to transfer data between one another without requiring them to inherently trust each other. Rather, participants need only trust the system as a whole.

Understandably, establishing a secure Blockchain which earns the user’s trust proves to be quite the difficult task. Trust, and therefore significant user adoption, can only be successfully earned when a Blockchain combines the right mixture of sensible features. Adoption of secure cryptography algorithms, efficient and distributed storage protocols, unapologetic transparency, and several other fundamental principles which differ across implementations all contribute to earning such public support and momentum. (For more information on how Blockchains promote transparent decentralization check out “Blockchain’s Killer Application?”).

Blockchain implementations have predictably found vast success in the financial sector, as the technology naturally lends itself well to storing and transferring monetary value. However, as the technology itself has improved, a growing number of projects hoping to utilize Blockchains for transmitting other forms of digital value have flourished. The field is no longer explicitly tethered to the financial industry for value, and the possibilities for new applications are endless. Nowhere is this excitement more concentrated than within the Ethereum community.

Ethereum’s vision for the future

Ethereum is one such well-suited Blockchain which might win the battle to serve as the future “back-end” of a decentralized web 3.0. This because by design, Ethereum is intended to be a general-purpose Blockchain. A sort of blank canvas by which developers have the freedom to build whatever they desire upon. Transactions on this Blockchain are abstract and can represent anything such as an entire internet. One where previously existing centralized solutions are replaced with more transparent and decentralized approaches. Where content can flourish without fear of censorship from central points of failure.

Ethereum calls these applications running on top of their Blockchain “decentralized applications” or “dapps” for short. Ideally, such decentralized projects on the network will fully leverage the Ethereum Blockchain to build products that actually run entirely autonomously. Autonomous code that is hosted on the Ethereum Blockchain is commonly referred to as a “smart contract.”

In other words, these smart contracts are immutable sets of rules and conditions which get pushed to the decentralized network. Anyone with a copy of the Blockchain can interact with the contract as long as it follows the declared rules. Smart contracts require no ongoing oversight, cannot be modified once they’re deployed, contain transparent open source code, and can optionally have no owner whatsoever. This new system could provide the internet with an ecosystem of low-overhead products and services that are maintained by enthusiastic developers, and largely owned by the community as a while. Ensuring such conditions in a persistent manner was never fully possible before Blockchains, and as such Ethereum could bring about an entirely new sector for automated businesses. Businesses which might restore the internet to a proper democratic balance.

Conclusion

With such rapid growth in recent decades, it has become easy to forget how digital infrastructure was once predominantly decentralized. Amidst this chapter of the internet’s early history remained a rigorous adherence to net neutrality. An open exchange of information was taken for granted, and balanced democratic oversight was the norm. This internet is the vision which we should aim to return to and uphold. To fortify through what we’ve uncovered about decentralization, and to expand upon with the use of modern technology recently made available. Blockchain technologies such as Ethereum might just pave the way for that vision, but in the process, we must not allow ourselves to easily forget today’s luxuries as we have yesterday’s.

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Lightning & Raiden: How Blockchains will scale to serve millions

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Outline

  1. Introduction
  2. Dissecting Blockchain transactions
  3. Payment channels
  4. The Lightning network
  5. The Raiden network
  6. Conclusion

Introduction

There is one fundamental issue affecting all miners, traders, and end-users of popular cryptocurrencies such as Ethereum and Bitcoin. While both communities have their fair share of disagreements, they have been unanimously forced to acknowledge a common limitation shared by all Blockchain technologies. This limitation is known as scalability. In recent months, as both cryptocurrencies have seen their usage explode in terms of demand and public adoption, this issue has emerged as a dominant talking point for developers and investors alike. For Bitcoin, this issue has even manifested itself in the form of several very large backlogs of transactions that have triggered volatile price fluctuations. Quite simply, with exponential growth comes exponential headaches for Blockchain technologies.

 

Recently though, the issue of Blockchain scalability has seen its fair share of good news too. Developers for both Bitcoin and Ethereum have made vast improvements towards overall scalability. For Bitcoin, this was evident with the recently activated Segwit update, which has alleviated much of the problem for now. For Ethereum, the most recent Byzantium hard fork has also introduced several key improvements towards their daily transactional capacity. However, both of these cryptocurrency giants face a looming reality. Blockchain, in its pure form, can only scale so far.

 

The core concept behind a Blockchain is that all users, known as nodes, store a full copy of the ledger on their device. This concept has proven to be revolutionary for decentralization but fails to account for the obvious. There inherently will come a time for every cryptocurrency when the number of transactions on the ledger becomes too large for the average user to store. It would be unreasonable to expect every mobile device or laptop on the network to hold a terabyte-sized ledger. Similarly, it would be unreasonable to expect such devices to process thousands of transactions per second with current network configurations. Too much usage paired with rapidly increasing user adoption could potentially gridlock the entire system.

 

To solve this issue, both communities are planning to implement several unconventional features known as “off-chain scaling solutions.” These solutions will hopefully solve scalability for good but come at the cost of vast contention among community members. Many argue that these so-called “off-chain” solutions sacrifice the integrity of Blockchain’s inherent decentralization, as well as its overall transparency. The argument that these members hold is that off-chain solutions come at too steep of a cost. However, others argue that these features can be implemented responsibly and that they are necessary for survival. This article will be focusing on one such popular off-chain solution, known as a “Payment channel.”

 

Before we understand what they are though, let’s see why they are necessary.

Dissecting Blockchain transactions

The problem with transaction scalability is that decentralization inherently requires a delicate balance between users and validators. Since there are no central mediators (conventionally known as banks) to validate user transactions, decentralized Blockchains rely on a community of trusted validators known as “miners.” For these miners, the system must ensure that it remains profitable for them to tell the truth. In the case of Ethereum and Bitcoin, this trust is ensured through the use of complicated cryptographic puzzles. Users understand that if a miner mines a block (solves a cryptographic puzzle) truthfully, they will receive a large payout. In fact, the payout is large enough that it remains vastly more profitable to tell the truth than to lie about a transaction’s contents. Therefore, we can collectively trust that these validators will act honestly without knowing them personally.

 

As such, decentralization is a balancing act where truthfulness in the system must remain profitable and achievable. Each and every transaction placed on Bitcoin or Ethereum gets approved because of this key philosophy. Inevitably though, the miners become the bottleneck to this transaction process. This whole system was maintainable when Blockchains were first starting out, but it is no longer very practical.

Above is a chart showing the total number of daily transactions on Ethereum from October of 2015 to February of 2018. You’ll notice that evidently, daily transactions have exploded in the last few years. This requires a huge amount of computational power to verify each transaction in a timely fashion, which oftentimes miners simply cannot provide. When miners cannot meet such demand, the waiting period for each transaction skyrockets. This is not to say that things are bad every day, but there have been numerous times, usually following significant events such as a highly anticipated ICO, where transactions can be backlogged for hours if not days. Understandably, a solution is desperately needed to this problem. So what’s the leading prospect? Payment channels.

Payment channels?

A payment channel is a sort of two-way connection between users which enables them to conduct transactions outside of the Blockchain. This greatly reduces waste on the Blockchain and cuts back the total number of transactions that miners will have to validate. Miners still exist and do most of the work, but off-chain solutions give them room to breathe and grow. Additionally, it reduces the fees that users will have to pay over time.

 

But how does an off-chain transaction work?

 

For the sake of avoiding confusion, I’ll keep this explanation very brief. Every Bitcoin/Ethereum address has a unique private and public key. If two parties know that they’ll be sending each other frequent transactions, perhaps in the form of micro-payments even, they can use this sense of identity to their advantage.

The participants of an off-chain transaction interact by signing transactions among themselves without submitting anything to the Blockchain. Two users, Bob and Alice, agree on a payment structure of 0.1 Eth/hour. Each hour Bob will sign a transaction of 0.1 Eth and give it to Alice. When Alice has completed her work, the transactions will be combined and submitted to the Blockchain as one full transaction.

This would be a great solution, if not for the fact that people often disagree with one another on the contents of transactions. What happens if Bob pays someone else while Alice is working, and no longer has the proper funds to pay her when she submits her signed transaction? How does one prove that they indeed have funds to send in the first place?

Because of these issues, Bitcoin and Ethereum have been developing forms of payment channels that exist offline while still interacting with the Blockchain for additional security and verification. Both teams have developed unique solutions, and both solutions offer different advantages as well as disadvantages.

Bitcoin’s approach: the lightning network

The lightning network is Bitcoin’s answer to off-chain transactions. The system is designed to replace most common on-chain transactions, and developers of the lightning protocol argue that most users will actually want to use lightning over on-chain transactions for day-to-day payments. This, because they’ll be both faster and cheaper to conduct. If the protocol works as designed, it would mostly solve Bitcoin’s scalability issues in terms of transactional capacity for years to come. Conceptualized by Joseph Poon and Tadge Dryja, this network presents several interesting concepts for solving off-chain agreement issues.

For example:

Imagine Alice wants to send 0.1 BTC to John. Using the lightning network this can be done with an intermediator who we’ll call Bob.

 

The transaction begins with both Alice and John opening independent payment channels among Bob. This establishes Bob as the trusted intermediator for their transaction and provides a buffer between Alice and John. Once this link has been formed between the three parties, John can generate an invoice of 0.1 BTC which he’ll send to Alice. This invoice contains a cryptographic hash of his Bitcoin address, which acts as a digital signature. In return, Alice signs her payment for this invoice using her own cryptographic hash, or signature, and passes it to Bob. The result is that the transaction has been signed by both parties, and given to Bob for processing.

 

At this point, there are two key conditions that bob is held to:

1.) Bob only gets the 0.1 BTC if he can prove that he has a channel open with John.

2.) There is a period of 2 days wherein, if Bob does not send John the money, Alice gets a refund of 0.1 BTC.

Bob then shows the transaction to John, proving that he has interacted with Alice, and triggers two more conditions that must be met:

1.) John must accept or reject this transaction, based upon it being the agreed upon amount.

2.) John must prove that he can produce the original signature embedded in the transaction.

Using this system of signatures, Alice and John can conduct as many transactions as they’d like with Bob as their intermediator. Once they have completed their business, they submit the end result to the Blockchain to make it permanent. This system comes with several key advantages and disadvantages. The lightning network allows for instantaneous payments, does not require miners, works great for micropayments, reduces bloat on the blockchain, and helps promote blockchain scalability. However, it does require a third-party intermediator.

Ethereum’s approach: The Raiden Network

Ethereum’s version of the lightning network is called “Raiden” and was developed with Ethereum’s unique features in mind. Ethereum transactions work differently than Bitcoin transactions, largely due to a feature called “Gas.” On Ethereum, transaction fees are dynamic and respond to network congestion. This allows for fees to increase during high-traffic periods, thus incentivizing more miners to join Ethereum, while also de-incentivizes users from submitting less important transactions during this crunch period.

At any time, users can also pay higher transaction fees to incentivize their transactions. Miners surely tend to prefer transactions with higher payouts, and thus the result is a system where important transactions can be expedited. However, this also creates a pay-to-play system during congested hours which works against the common user.

As for on-chain transactions, Ethereum can currently process around 15 transactions per second, with an average transaction taking 20 seconds. These figures are excellent when compared to Bitcoin’s mere 7 transactions per second capacity, but the increase only makes for a small dent in dealing with the average demand both networks are now receiving. In order to make these transactions faster, and to prevent Blockchain bloat, the Raiden network was introduced.

How does Raiden improve upon Ethereum’s total transaction capacity?

Just like the Lightning network, Raiden processes transactions without pushing them to the Ethereum Blockchain initially. However, Raiden does not need a third party to handle transactions. This is possible because Raiden takes advantage of so-called “smart contracts” that exist on the Ethereum network. These smart contracts can be thought of as vending machines which run predetermined instructions. Therefore, there is no need for an intermediator, such as with Bitcoin, as the process is delegated to an autonomous machine that lives on the Ethereum network.

So, how does Raiden work?

Suppose Alice wants to pay Bob 1 Eth using Raiden. Alice and Bob open an off-chain payment channel by deploying a smart contract to the network and depositing a base amount of Eth into it. This initial deposit can be for any amount and can be increased at any time. When Alice wants to send 1 Eth to Bob, she simply signs the message “1” and sends it to Bob outside of Ethereum by using the Raiden network. Bob now has cryptographic proof of Alice sending him 1 Eth, and can verify that there is a sufficient balance left on the smart contract to redeem.

 

Should Alice then want to send Bob another transaction on Raiden, She just needs to update the state of the message to reflect whatever end-value she desires, sign it, and send it to Bob over the Raiden network again. The moment Bob wants to redeem the funds he has received, Bob simply tells the smart contract to close out the channel. The channel will sort out the final balance, return any unused deposits, and save the final state onto the Blockchain permanently. The result is an off-chain scaling system for Ethereum which enables for fast and simple transfer of money while simultaneously decreasing the total load on the Ethereum Blockchain.

 

Conclusion

As Blockchain-based cryptocurrencies continue to gain mass-adoption from countless industries, the need for alternative scaling solutions remains imperative. While on-chain transaction validations such as mining and staking will continue to serve as the primary line of defense for decentralized network health, off-chain transactions will ultimately serve to alleviate pressure on the network. The result will be a more balanced and scalable ecosystem which improves network quality for miners, investors, and end-users alike.

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Blockchain’s Killer Application?

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Outline

  1. Introduction
  2. Peer-to-peer payments
  3. Smart contracts
  4. Immutable records
  5. Decentralized file storage

 

Introduction

In October of 2008, Satoshi Nakamoto issued a challenge to trust-providing organizations with the release of his infamous whitepaper titled “Bitcoin: A Peer-to-Peer Electronic Cash System.” The notion detailing how currency can be decentralized, summarized by Nakamoto in only eight pages, gave birth to a new technology now recognized as a Blockchain. At the time, Nakamoto’s work was only really appreciated in academic circles. Blockchain was an interesting concept, but Bitcoin was hardly a convincing demonstration of what the technology could represent at scale. Amazingly though, Nakamoto’s work has since disrupted established institutions such as banks and online payment processors. Most incredibly, “cryptocurrencies” such as Bitcoin and Ethereum have exploded into a cultural phenomenon.

Despite seeing such extraordinary success in the financial sector thus far, decentralized currency is not the killer application of a Blockchain. Rather, decentralization itself is what is so innovative about Blockchains such as Bitcoin and Ethereum. Nakamoto’s work didn’t just outline a decentralized future where users have control over their own banking systems — it offers a clever method of establishing data assurance among digital strangers. Blockchain at its core is a mechanism which ensures positive collaboration among unacquainted individuals through the use of cryptography, monetary incentives, and complete transparency. A leaderless system by which users can interact with one another through simply trusting the system itself, and not each other. Without the need of a centralized mediator, often indicated by archaic centralized servers, Blockchain is offering an alternative to the entire architecture of the internet itself, not just the banking industry.

It seems that this is often the largest point of confusion among cryptocurrency / Blockchain skeptics. Those who divulge themselves in communities more focused on the technology understand firsthand the broader implications of decentralized trust systems. Ethereum, the second-largest cryptocurrency by market cap, has gained massive attention surrounding their growing catalog of start-ups and businesses aiming to bring Blockchain to new sectors with this very notion. Because of this, Ethereum as a whole has seen massive growth when compared to Bitcoin’s slowing adoption over the past two years. Forward-thinking businesses and institutions are understanding the rewards of utilizing Ethereum for their digital infrastructure, and how it generates cheaper, more secure, and more trusted protocols for their day-to-day operations. Simply put, businesses who don’t adapt to utilize Blockchain will pay a hefty premium.

So how are businesses benefiting from Blockchains today?

Peer-to-peer payments ?

Many businesses require payments from different states or countries. Traditionally, these transactions have been slow and expensive to conduct due to antiquated techniques such as wire transfers, and expensive middleman services such as PayPal. One of the clearest promises of cryptocurrencies such as Bitcoin and Ethereum thus far is that they will conduct global transactions exactly like any given domestic transaction.

This, of course, would enable businesses to transfer money across the globe within seconds instead of days. Blockchain-based cryptocurrencies open up the potential for huge advancements in globalization efforts. The result would be a future where transactions bypass potentially oppressive governments and are instead conducted by equal peers without the need of any trusted intermediaries. Given this potential, the ability for common businesses to expand to global markets will no doubt be another key area of large-scale adoption for Blockchain technologies.

Smart contracts ?

Smart contracts assist the exchange of money, property, shares, or any form of data/value in a decentralized and transparent manner. With smart contracts, parties can expect a conflict-free way to make exchanges without the need of a middleman or third party.

Simply put, smart contracts are similar to a digital vending machine. With classical contracts, a participant needs to hire a lawyer or notary which will draft a legal document for their transaction. This service requires participants to pay hefty fees and consumes a significant amount of the consumer’s time. With smart contracts, you are presented with an autonomous system which can read, write, manage, and execute whatever terms and conditions you feed into it. There is an abundance of pre-existing smart contracts, all of which contain code that is both transparent (open source) and heavily audited, as well as simple services which help you draft your own contracts. Smart contracts exist and execute on top of the Ethereum Blockchain. This ensures that they are just as secure, transparent, and immutable as any regular transaction parsed on the network.

For example: Let’s say that Miningstore.com holds a tally each Friday to decide where the team will get lunch from. A smart contract could be drafted to manage the entire democratic process. More so, smart contracts not only define the rules and penalties around this agreement in the same way that a conventional contract would, but it can also automatically enforce those outcomes. Each week, the contract could accept deposits of $10 from approved users and records their vote for where they would like to get food from. Come Friday at noon, the contract could not only declare the winner but could also transfer the money to the winning restaurant and prompt users for their order.

While this is obviously a pretty laughable application, smart contracts hold a wide array of genuinely significant potential usages which could help automate and revolutionize an abundance of popular industries. Not to mention, as more industries adopt Blockchain infrastructures, they’ll increasingly be able to communicate with one another in a trustless fashion. Think of the future of Blockchain as an ecosystem of interconnected services that can conduct transactions spanning across multiple businesses, websites, and applications without the need of centralized mediators. Smart contracts could make real estate escrow services, driver’s licenses, freelancing boards, and plenty of other fields obsolete while also interconnecting the digital world.

Immutable records ?

An essential function of private and government organizations is to maintain accurate and timely records of individuals, organizations, assets, and more. Collecting and analyzing any such data across local and national levels, or for corporations which might process global-scale data, tends to be an extraordinarily uphill battle. For instance, data such as birth/death certificates, payroll transactions, marital status, property transfers, taxes, criminal records, and more often lack a unified registry or schema format. This data has to be regularly processed and maintained by a human workforce shifting through fragmented databases with inconsistent results.

Managing and securing this vast amount of public and private information can be extremely complicated as well, and is extremely expensive. In fact, plenty of records still exist only in a paper form. These paper records require extensive efforts to append to while offering very insufficient security and immutability. Often times, if changes need to be made to them, citizens must physically appear in person to append even the slightest information. Needless to say, the systems we currently rely on across private and public industries must be substantially improved upon.

Blockchain technology could considerably simplify the management of trusted public and private information, making it easier for government agencies and private businesses to access and use critical records. Doing such, while also maintaining the security of this information to a considerably higher standard, could tremendously reduce waste. A Blockchain is at the most basic level an append-only digital ledger, one which is stored on multiple computers in a public or private network, and thus ensures more durability as well as accuracy. It contains data records or “blocks” which cannot be modified without ludicrous computational power. Once these blocks are collected in a chain, they simply cannot be changed or deleted by a single actor. Instead, they are verified and managed using automation and shared governance protocols. Such a system is perfect for append-only data record industries. The result of industries adopting Blockchains for record keeping could mean more accessible and accurate data for businesses to benefit from together.

Decentralized file storage ?

A growing number of small businesses are increasingly switching to cloud storage solutions for their day-to-day operations. While these solutions cut costs and improve the overall efficiency of common tasks, they also come at a steep cost regarding further centralization of the internet’s backend infrastructures. Solutions such as AWS, Google cloud engine, and Microsoft Azure open much of the web to single points of failure where hundreds of thousands of websites live. With these centralized solutions governments can monitor and censor content easily, servers are vulnerable to downtime from DDOS attacks, and data is insecurely kept on one server.

Contrary to large cloud storage solutions though, Blockchains promote distributed file storage and are making large gains over established centralized competitors. Decentralizing file storage across the web would close several single points of failure, reducing the potential for any significant data loss or downtime. Some businesses such as Storj, IPFS, and IPDB have been applying decentralized ledgers to file cryptographic hashes (or digital fingerprints of data) for consumer data. The technology utilizes the collaborative nature of Blockchains to promote shared file hosting among strangers in a trustless ecosystem.

Storj.io for example, instead of storing files on a single centralized server, saves fragmented pieces of your files on thousands of devices across the globe. Each chunk has several copies, and which particular chunk is stored on which particular device is recorded on the Blockchain. If you need to retrieve that file, the system will assemble it for you based on this information. At scale, this approach becomes cheaper and more secure than cloud storage. While the centralized cloud storage stores your file on several backups, the decentralized storage will keep your data on an even bigger number of devices, therefore, increasing dependability.

For centralized systems, however, the strength of the system depends on how secure one company’s servers are. Using decentralized networks as an alternative, there isn’t one single device that contains the complete file, making it practically impossible for hackers to obtain any private data.

The killer application is already here

Peer-to-peer global payments, smart contracts, immutable records, and decentralized file storage solutions are just a few areas that businesses are adopting Blockchains today. The “killer app” for Blockchain, on the other hand, is already here. Decentralization lead by Blockchain solutions will be a significant driving force of innovation and growth across the next web. As internet access continues to reach new audiences in emerging nations — and global reliance on digital services continue to grow, the internet will need these new tools fueled by Blockchain to meet rapid demand. Businesses which support and adopt such solutions will be the leaders of not just financial industries, but all industries.

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Cryptocurrency Fight Club — Who Will Reign Supreme?

Bitcoin versus Ethereum MiningStore.com cryptocurrency battle

Outline

  • Introduction
  • Durable Consensus
  • Scalability & Transactions
  • Node & Mining Health
  • Transaction Fees
  • Smart Contracts
  • Conclusion

Introduction

As of writing this post, there are three leading cryptocurrencies which have surpassed a market cap of $100 billion USD. These cryptocurrencies include Ethereum, Ripple, and most recognizably Bitcoin. Ethereum and Ripple both exceeded a market cap of $10 billion USD this past year, trailing four years behind Bitcoin’s own eleven figure evaluation. Despite the clear historical advantage Bitcoin has held over other cryptocurrencies thus far, the world’s most popular blockchain was only three months ahead of Ethereum and Ripple when it came to reaching a $100 billion USD market cap. In terms of this alone, Bitcoin’s dominance is acutely shrinking. However, it is important to note that the market cap of a cryptocurrency only reveals a slice of the whole economic picture. In terms of worth derived from actual technical ability and application, the convergence between Bitcoin and competitors has become even thinner.

The technical strength of a cryptocurrency can be determined by measuring a blockchain’s effectiveness at several key operations. Among these measurements are blockchain security, transaction fee costs, network scalability, reliable consensus protocols, and the presence of / robustness of smart contract programming languages. In simpler terms, this all might sound more obvious. When one blockchain is observably better than another blockchain at accomplishing several complex tasks, while still maintaining competitive performance in other tasks, they’ve historically shown explosive growth and flourish in market value.

These factors of technical strength remain clear indicators of whether or not a cryptocurrency will succeed across long-term exposure to the ecosystem, and how well they’ll fare against similar competitors. Nonetheless, there’s nothing truly preventing the market from favoring multiple blockchain solutions for long-term support. This is most evident in cryptocurrencies which provide significant technical advancements towards specific applications, usually by sacrificing efficiency elsewhere. IOTA, which currently ranks 10th overall in terms of their market cap, offers unparalleled transaction scalability through the use of an exploratory technology known as a “tangle”. This technology differs greatly from the blockchains used in Ethereum and Bitcoin but comes with several unfortunate drawbacks. Most noticeably, is a structural inability to support most smart contract functions. For this reason, IOTA is a very favorable solution for traditional 1-1 transactions but is not suitable for more complex smart contract uses. Therefore, It’s conceivable that the future could value an array of cryptocurrencies which serve different specific purposes should alternative solutions to current problems remain unsolved.

With so many problems to solve, complete dependence on Ethereum, or any cryptocurrency for that matter, is not necessarily a guaranteed outcome. In the near-term, there should be plenty of room for specialty cryptocurrencies. Direct competitors such as Bitcoin, Ethereum, and Ripple will start to see a dominant force arise in terms of their total value though. So why might Ethereum be this dominant force in the market?

Durable Consensus

Achieving a healthy and durable consensus on a blockchain is incredibly challenging. Consensus refers to how a blockchain decides upon implementing changes to a system. Think of this portion of the platform as the blockchain’s central government. This department is responsible for deciding what new features to add, how difficult mining should be, how best to address bugs, and how to solve other such communal issues. Furthermore, when dealing with a decentralized blockchain, consensus becomes exponentially harder to preserve.

 

Bitcoin itself was created by an anonymous figure known as Satoshi Nakamoto. Seeing as how Satoshi Nakamoto has never revealed themselves, Bitcoin has consequently suffered from a lack of stable leadership. Many people will claim that they know what is best for the future of Bitcoin, but few have ever truly obtained the public’s collective support. Many blockchain developers even believe that it is because of this lack of sustainable governance that Bitcoin has been unable to address several tremendous scalability issues. Meanwhile, the Ethereum community which is lead by Vitalik Buterin remains a more transparent and streamlined governance. Regardless of how you feel about Ethereum’s methods for this, the results certainly show quicker development turn around.

Regarding Vitalik Buterin:

Ethereum was created by Vitalik Buterin. Vitalik, a young and brilliant Russian-Canadian who is incredibly active in the community he built, has largely fit the primary authority role within the Ethereum world. Regardless of how this affects Ethereum’s decentralization, as many are quick to call him a “dictator” of sorts, Vitalik’s position largely accelerates the development process. For reaching consensus on new features and fixes, he simply whips the votes. While the opinion that Vitalik has too much power is understandable, one might argue that he is largely viewed as influential because of his work and contributions to Ethereum, not because of some monetary ownership like Ripple. As the core code contributor of Ethereum, it stands to reason that his opinion would merit more value and contain incredibly insightful knowledge of Ethereum’s inner workings.

 

Scalability & Transactions

Transactions

Ethereum can currently process around 3x the number of transactions per second that Bitcoin can with on-chain methods. However, Bitcoin still processes the majority of fiat-to-crypto transactions made online. However, these transactions are done on centralized exchanges and do not accurately represent anything blockchain-related. However, this fact definitely makes bitcoin more liquid with respect to transferring from fiat currency to cryptocurrency.

 

General Scalability

Most of Bitcoin’s scaling efforts have been surrounding SegWit, which is a proposal to reduce on-chain transaction size. Bitcoin has also been working on adding support for Lightning, which is an off-chain transaction method. Lighting would be great for things such as micro-payments and would enable zero-fee transactions. Ethereum also has an off-chain transaction proposal known as Raiden. Raiden won’t just work with Eth though, but rather with any ERC-20 Ethereum token as well. Additionally, Raiden will interact with smart contract state changes.

In addition to Raiden, the Ethereum community is also implementing additional scaling solutions such as proof-of-stake and sharding. Both of these are being fully tested on alpha networks before being implemented on the Ethereum mainnet. They’ll require significant work before being implemented publically, but promise more scalability than Bitcoin.

Node & Mining Health

The quantity of full nodes often indicates how decentralized a blockchain truly is, with some caveats of course. Essentially, that less overall nodes on a network the more centralized it is. If a network becomes too centralized, the entire system becomes at risk. Ethereum currently has more than double the number of full nodes as Bitcoin and therefore faces less risk.

The mining reward allocated to users is a large indicator of how secure a blockchain’s core technology is. This reward determines the cost of executing a 51% attack and gives powerful insight into the network’s overall health. Mining rewards are currently just about equal between Ethereum and Bitcoin, so this would mean that both blockchains are relatively equal with respect to hashing.

Transaction Fees

The undeniable winner for this category is Ethereum. Ethereum has exponentially lower transaction fees than Bitcoin, regardless of processing more transactions per day and having very similar mining rewards. Bitcoin continues to show slow progress towards reducing standard transaction fees, while Ethereum remains ahead and is focused on researching off-chain transaction methods which aim to reduce fees to zero.

Smart Contracts

Bitcoin is primarily a cryptocurrency capable of one-to-one transactions. Ethereum however, features a Turing-complete programming language which can be used to build “smart contracts” that exist on top of the network. This allows Ethereum to perform automated tasks and execute functions that extend way beyond applications for the financial industry. The ability to build decentralized applications on top of the Ethereum network remains one of the clearest advantages for their blockchain over others.

Conclusion

Despite Bitcoin’s current lead in overall market cap, Ethereum has shown extremely promising growth through promoting rapid adoption of new technological enhancements. Additionally, by building and sustaining a healthy leadership with transparent community interaction, Ethereum has grown to tackle a wide array of challenges, instead of focusing on a particular niche. Given all of the advantages, and Ethereum’s intent to be the general purpose blockchain, it’s likely that Ethereum will continue to grow in adoption. If Ethereum were to gain enough adoption during this time to pull ahead in terms of market cap, it’s also very likely that extreme liquidity would follow. Increased liquidity could easily solidify Ethereum as the de facto blockchain, and push the cryptocurrency ahead of Bitcoin in the public’s interest.

 

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Casper the Friendly Consensus Mechanism

Blockchain cryptocurrency mining

TL;DR: Casper is a proposal for slowly consolidating Proof of Stake into Ethereum. Proof of Stake will eventually replace mining (Proof of Work) altogether, but not before working side-by-side with existing systems to ultimately enhance the potential profitability of today’s growing mining community. This post begins by analyzing consensus as a whole but hopes to ultimately provide a useful breakdown of Proof of Work, Proof of Stake, and Casper from a perspective that is helpful to the entire mining community.

 

Mining Store’s intention is to provide members of the Ethereum community with valuable insight and explanations surrounding complex concepts central to future Blockchain development. However, no one including Vitalik Buterin himself can truly claim to be an expert on such intricate matters. As such, we encourage the community to direct any amendments, questions, and concerns to connor@miningstore.com where we’ll try our best to respond swiftly.

 

Outline

  1. Introduction
  2. Consensus
  3. Proof of Work
  4. Proof of Stake
  5. Casper
  6. Where is Proof of Stake today?

 

Introduction

While browsing different Ethereum-related communities on Reddit, BitcoinTalk, and Twitter, I noticed several recurring questions and concerns from miners:

 

“How long until Ethereum switches to Proof of Stake?”

 

“Will Proof of Stake make mining Ethereum obsolete?”

 

“Given that Proof of Stake is on the horizon, is it still profitable to invest in mining hardware today?”

 

These questions are without a doubt some of the most common fears and misconceptions being expressed by members of the mining community. It’s understandable that users are asking such questions, as attempting to familiarize oneself with core Ethereum functionality can be very intimidating. Understanding architectural changes being made to Ethereum’s core code requires combing through a massive reserve of technical jargon, heated discussions, and complicated abstract papers. How Ethereum will proceed with implementing a change as significant as Proof of Stake, to ultimately replace the existing Proof of Work standard altogether, can be a lot of information to break down at once. With that said, an excellent place to start is with understanding consensus.

 

What is consensus?

If you’ve ever familiarized yourself with the core technology behind Ethereum and Bitcoin, you’ve likely heard the term “Blockchain” being thrown around. All you need to know is this:

 

A Blockchain can be defined merely as a public ledger that keeps immutable records of transactions. Think of this as an append-only excel sheet which everyone holds a copy of and agrees upon it. Blockchains can store financial transactions, election results, shipping records, and just about any other transactional-based data structure.

 

For most of these potential applications, it is imperative that the ledger remains accurate and immutable. The term “consensus” refers to this ability of a community to collectively agree upon decisions that impact the accuracy and permanence of a given blockchain. As far as decentralized ledgers go, achieving said consensus is an immense accomplishment. With a leaderless collective of nodes, A.K.A a decentralized blockchain, it’s significantly more difficult to assure that everyone agrees at all times. So much so in fact, that the whole of the Ethereum community has yet to achieve consensus on how best to, well… achieve consensus.

 

Consequently, this brings us to the vast and ever-expanding list of so-called “consensus mechanisms” used by popular blockchains. Consensus mechanisms are architectural decisions and tools designed to prevent falsified transactions from occurring on the network. The general principle is to discourage lying by making it more profitable to tell the truth. I’ll save the full list of consensus mechanisms for another article, but for now, the two mechanisms you’ll want to familiarize yourself with are: “Proof of Work” and “Proof of Stake.”

 

Proof of Work

This consensus protocol relies on the principle that transactions remain expensive to produce in exorbitant amounts. Appending a hefty reserve of new transactions to the blockchain, which might be done as an attempt to spam or paralyze the network, would cost any potential attackers a substantial sum in transaction-related fees. This is due to the assurance that a certain amount of work must go into every transaction on the blockchain and that said work doesn’t come free of charge.

 

What makes Proof of Work exceptionally favorable is that despite the massive computational calculations that must initially be performed to verify a transaction, it becomes exponentially simpler to validate transactions the second time around. This is made possible by the underlying qualities and design fundamentals of cryptography itself.

 

Think of these transaction validations as scientific experiments. Proving an experiment’s thesis the first time around is very difficult in practice. Proving a theory requires exceptional patience and strict adherence to the scientific method, or a set of rules governing the entire process. Once someone has declared to have proven a theory though, the scientific community need not reinvent the wheel to validate it. By simply verifying the scientist’s existing work through a peer-review process, scientists determine if their new thesis is correct.

 

Proof of Work’s validation through solving “cryptographic puzzles” can be thought of in this manner. This article’s purpose is not to go into excessive detail about how exactly cryptography assures these conditions through mathematics, but if you find the topic of cryptography intriguing, there’s certainly no shortage of highly engaging content to brush up on.

 

What is also important to understand about Proof of Work in Ethereum is that transparency is essential to the mechanisms’ success. One byproduct of the Ethereum Blockchain’s transparency is that anyone with a full copy of the ledger can examine the collective history of work performed by miners, and verify it for themselves on their hardware. This unrestricted transparency creates a sense of “trustlessness” on the network which is unparalleled. If everyone can see the full history of work done on the blockchain, users need not worry about who is doing the actual work so long as their honesty can be mathematically assured. The result is a fully decentralized consensus mechanism which is surprisingly democratic and enforced by unique transparency.

 

In addition to transparency and cryptography, Ethereum goes so far as to take several additional precautionary measures when verifying transactions. Transactions are not considered to be fully ‘confirmed’ until several new blocks have been joined on top of them. If a malicious actor were able to spend coins fraudulently, this would give the network time to catch their attack and reverse. Fraudulent transactions that are  detected by the extra confirmations will be ignored by the rest of the network as if they never occurred. Making it even more difficult and expensive to attack the network.

 

This brings us to the largest vulnerability with Proof of Work as a consensus mechanism. With everything previously discussed in place, the only known way that an attacker could ever commit such a large fraud as double spending on the network is to possess a huge portion of computational power. Enough power for one user to mine each block for themselves, and ensure that they win the “cryptographic puzzles” every time.

 

This attack is known as a ‘51% attack’ due to the need to possess more than half of total network hash-rate (a simple majority of nodes). The honest reality is that no single party could achieve such a share of the total hash-rate. Having such a power would require massive capital investments that would likely outweigh the potential reward for an individual. In fact, attempting such fraud is almost economically infeasible for an individual when factoring the total hardware costs, energy usage, real estate needs, and maintenance demands. Additionally, if one user were to ever control a majority of the power but a minority of public backing, the community could essentially fork the blockchain and switch to a version without that node. The result would be a community that rejects the value of the new currency being created by the malicious and all-powerful node in favor of their collective community.

 

Consequently, it is better (i.e. more profitable) for miners under Proof of Work to remain honest. Proof of work is the current standard for Ethereum and most other popular blockchains because of this found success. Despite any flaws, it’s needless to say that the system works incredibly well for the difficult task it is assigned. The theory is clear and has served well for cryptocurrencies to date.

 

Proof of Stake

While worth celebrating, there are still several drawbacks to consider when using Proof of Work as a primary consensus mechanism. The wildly popular standard introduces several key scalability issues. These issues include highly demanding energy / environmental costs, increasing hardware requirements for miners, and exposure to possible centralization through economies of scale. All of these problems must be considered when looking at the future of Proof of Work (PoW), and the future of Proof of stake (PoS).

 

Proof of Stake is an alternative consensus mechanism that has gained massive community support in recent years. PoS has been able to observe several key problems found in PoW and has factored them into its design. Take for example the following scenario:

 

In Proof of Work, hash-rate determines how likely a participant is to add the next block of transactions to the blockchain. Seeing as how processing power is cheaper to buy in bulk, this opens the network to potential attack from large-scale parties. Examples include governments, corrupt mining pools, and botnets. It’s possible that, if malicious by nature, the largest mining pools banded together, they could easily control the entire network.

 

In Proof of Stake, however, the participant’s financial stake determines their likelihood to receive a reward. With PoS the more money that an address holds, known as “staking”, the more likely it is to discover the next block. It is similar to a lottery in that the winner is determined by chance, not by their resources. However, the more money ( which can be thought of like lottery tickets) they have staked, the higher their odds of discovering the block.

 

An attacker who wants to make a fraudulent transaction under PoS would need over 50% of the coins on the network to create a fraudulent transaction. Buying 50% of the coins on the network would push the price up steeply, and makes such an endeavor incredibly expensive, if not impossible. Whereas with Proof of Work, economies of scale make it much easier to gain a majority hash-rate through bulk purchases and alliances.

 

Casper

So how will Proof of Stake be implemented in Ethereum? Casper is Ethereum’s current Proof of Stake proposal. Casper is not a specific implementation, but rather a family of two major projects under current research by the Ethereum core development team. Essentially, there’s a version of PoS known as Casper FFG (developed by Vitalik Buterin) and Casper CBC (developed by Vlad Zamfir). The differences between the two seem minor until you start diving deep into their collective documentation. Let’s just say that, well, doing such requires a hefty sum of technical knowledge. Ultimately though both implementations have the same goal of moving Ethereum towards proof of stake.

 

Casper would not be a complete replacement of Proof of Work. In fact, the idea behind Casper is to build a hybrid PoW/PoS consensus mechanism which can be observed and tested before making any permanent changes to the platform. Under the current tested version of Casper, staking only occurs every 50 blocks, and acts as a sort of additional checkpoint for block validation. The result is a system which has all of the benefits of Proof of Work, and all of the benefits of Proof of Stake. Proof of Stake acts as an additional security layer which counteracts the centralization risks of Proof of Work.

 

As a result, Casper will gradually bring about a more secure Ethereum which benefits both users and miners. As a miner, Casper will ensure that centralization does not pose a risk to generating profits. Additionally, promising users a more stable and secure platform usually serves to inflate currency prices and promotes market confidence. Making the act of mining Ether, and holding onto generating funds more profitable in the long-term.

 

Where is Proof of Stake at today?

On December 31st, 2017 the Ethereum core development team released their first alpha test-net of Casper to the public. While a huge achievement worth celebrating, it is important to note what the alpha network actually includes:

  • Support for Pythereum (one of three major node clients)
  • Unoptimized performance at the code’s current stage
  • Unfinalized plans for global parameters/settings such as the required base investment to participate in staking Ether
  • Staking only occurring once every 50 blocks
  • A lack of public testing and data analysis regarding Proof of Stake

 

There’s evidently a huge amount of work and research to be done before we’ll ever see Casper implemented on the main Ethereum network. Also, Casper does not bring about the end of Proof of Work, but rather the coexistence of two great mechanisms which will further Ethereum’s security and overall public support. While there’s no official timeline for Casper’s roll-out, it’s safe to say that there’s plenty of room for Proof of Work in 2018 and beyond.

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What Will 2018 Hold for Rising GPU Prices?

ethereum cryptocurrency mining MiningStore.com

TL;DR: The rise of cryptocurrencies has brought with it a significant demand for bulk graphic processing units (GPUs). Manufacturers of these units, which have proven to be very useful for mining cryptocurrencies, are desperately fighting to keep up with recent demand. The issue has polarized communities and raises questions about whether or not cryptocurrencies will provide long-term demand for manufacturers. This article hopes to dive into some possible answers and breaks down different perspectives on the issue.

 

Outline

  1. Introduction
  2. Ethereum’s GPU Boom
  3. Pushback from GPU manufacturers
  4. Meeting market demand in 2018
  5. The Proof of Stake Issue

 

Introduction

Last year, in what some enthusiasts might call the first successful moon landing since December 11th, 1972, cryptocurrencies celebrated stellar growth rates. Ethereum, Bitcoin, Litecoin, Ripple, and other such cryptocurrencies went from underground hobbies to heavily-backed and well recognizable stars. This shift, primarily due to an explosion of interest from a range of investors, miners, and tech startup companies brought with it several new challenges for hardware manufacturers.

 

As the price of these emerging cryptocurrencies has erupted, so has the demand for high-end graphics cards. What is a GPU and how does it perform calculations differently from another processor? GPUs (Graphics Processing Units) are computational units designed for completing simple yet massive calculations in a brief timeframe. A common example of this would be outputting high definition video to a monitor/television, rendering changes to a video game, or simulating physics engines for scientific experiments. As it turns out, these types of processors are also great for making the calculations needed to mine cryptocurrencies.

 

High-end GPUs have seen unprecedented price hikes and massive supply shortages from online and retail businesses because of this gold rush in cryptocurrency mining. Sales of high-quality graphics cards, traditionally used for gaming, have been reported to have spiked as much as 88% from last December. Those hit hardest by the cryptocurrency gold rush include mid to high-end products from AMD and Nvidia. The price of some mid-range and high-end GPUs doubled, and for more than a month, it was nearly impossible to find a retailer selling Nvidia GeForce GTX 1070s or an AMD Radeon RX 580s. These graphics cards are in such short supply as a result of new cryptocurrency demand, but why is this the case at all? Why are GPUs overtaking demand for other processing units?

 

Ethereum’s GPU Boom

Ethereum is a blockchain-based platform which enables developers to build and deploy decentralized applications on top of a growing network. The advantage of Ethereum over something like Bitcoin is that it can support many different types of decentralized applications and general purpose contracts. Applications are not just limited to basic financial transactions but become applicable to any particular industry.

 

Ethereum also has the second largest market cap after Bitcoin and has gained massive growth in the last year. The market cap for Ethereum (Eth) has reached over $100 billion and has a circulating supply 82.7% greater than Bitcoin.

 

This recent demand for Ethereum applications has also brought significant demand for Ethereum miners. Ethereum mining is similar to Bitcoin mining, in that miners will also have to solve complex cryptographic puzzles to receive their reward. Except, Ethereum’s Proof of Work algorithm requires not just computational power, but memory allocation as well. This reduces the competitive advantage of ASIC mining rigs (specialized hardware made for one type of calculation) over common GPU rigs. The result is a mining ecosystem which is resistant to the emergence of specialized hardware that favors bigger players and investments.

 

Ironically though, it would seem that this distinction in Ethereum has created a bigger problem than the one it was originally attempting to solve. The point of using GPUs over a specialized ASIC device was to maximize the opportunity for independent miners to participate. Seeing as how graphics card manufacturers can’t seem to keep up with the community’s demand though, it has created a buyer’s market where bulk purchases from wealthy investors prevail small orders from independent miners.

 

Pushback from GPU manufacturers

Ethereum provides a highly valued service for decentralized application developers, as well as emerging financial institutions. Despite all of this new found demand from within the blockchain and mining community though, manufacturers seem vocal about sticking to their original market.

 

Nvidia has encouraging its retail partners to prioritize gamers over cryptocurrency miners, but this suggestion often falls on deaf ears. Retailers can generate much larger margins by selling directly to miners currently. It seems unlikely that retailers would act outside of their interests to follow the will of Nvidia’s recommendations. While individual retailers are limiting bulk purchases so that miners can’t hoard stacks of graphics cards and alienate other consumers, most retailers are embracing demand. Other companies like Micro Center are specifically offering discounts to PC gamers who buy graphics cards alongside other components, which helps gamers but doesn’t necessarily punish miners either. Micro Center blames the high demand from miners on constrained shipments from vendors, which vendors blame on industry-wide shortages due to contract limitations.

 

As you might imagine, video game makers also weigh in on this controversy. For miners, price increases simply represent changes to potential returns on investments. For members of the gaming community though, and businesses that revolve around this community, price increases often mean users migrating away from the PC industry. Price increases are driving troves of PC gamers towards consoles from Microsoft and Sony. Several huge players in the gaming industry are either rooting for, or against, these changes in demand based upon their interests.

 

Meeting market demand in 2018

This is a shortage that’s affecting pricing worldwide, not just in the US. It seems unlikely to end unless graphics card vendors can flood the market to keep up with interest, or cryptocurrency demand drastically dwindles.

 

Nvidia and AMD both share a similar business model of licensing their unit designs to manufacturers. The two companies focus on the design process of generating graphics cards and return a profit from these competitive licenses they provide to actual manufacturers. The result is a very politicized environment, where companies fight for the right to manufacture graphics cards at all. For Nvidia and AMD, this new demand simply means streamlining their workforce and sticking to their expertise. Rather, the crisis of GPU production falls on the shoulders of their first party vendors and chip manufacturers. A few of these manufacturers include Foxconn, TSMC, Samsung, Asus, Gigabyte, and EVGA. All of which have very specific contracts that outline their terms and prevent each other, as well as new manufacturers, from producing more units currently.

 

This business model produces a lot of unnecessary overhead and is a significant portion of the larger problem at hand. One thing is for certain though, which is that demand is not decreasing from both communities.

 

The Proof of Stake Issue

Many vocal members of the mining community, as well as the GPU industry, argue that Proof of Stake will diminish demand among miners and return the community to a balanced point. However, Proof of Stake’s adoption timeline remains to be seen.

 

On December 31st, 2017 the Ethereum core development team released their first alpha test-net of Casper to the public. While a huge achievement worth celebrating, it is important to note what the alpha network has a long way to go. There’s evidently a massive amount of work and research to be done before we’ll ever see Casper implemented on the main Ethereum network. In addition, Casper does not bring about the end of Proof of Work, but rather the coexistence of two great mechanisms which will further Ethereum’s security and overall public support. While there’s no official timeline for Casper’s roll-out, it’s safe to say that there’s plenty of room for Proof of Work in 2018 and beyond.

 

This raises an important question for Nvidia and AMD:

 

If demand for both industries is not met, will the PC gaming industry survive to fight another day?

 

As miners are able to take larger risks, and buy more expensive GPUs, gamers will continue to receive subpar treatment over the next few years. It’s understandable that this could significantly drive gamers and developers away from PCs, and over to consoles. It’s conceivable that by ignoring miners to appeal to gamers, Nvidia and AMD are only hurting their long-term profits. Perhaps the best solution is to give the market what it wants and to issue more contracts to new manufacturers.

 

For PC gamers, this all represents a potential worst-case scenario, but whose fault is it? With no immediate solution being proposed, some comfort can be taken in the fact that companies will always want to generate larger profits. Selling more cards to as many people as possible is a clear answer, as profit is their primary goal. However, it’s unclear that Nvidia and AMD understand their market has truly changed. Both gamers and miners need to collectively demand that the industry adapts to their calling, and hopefully that should push companies to increase the total potential orders they can handle instead of pushing off demand. Only through teamwork can both markets truly see a better landscape for GPU prices.

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Mining Ethereum in 2018

MiningStore.com graphics card

TL;DR: Mining Ethereum over Bitcoin offers a lot of potential for independent miners, and can be accomplished with readily available and multipurpose hardware. This post will dive into all of the necessary steps for getting started with mining Ethereum in 2018.

 

Outline

  1. Introduction
  2. What is Ethereum?
  3. Generating a wallet
  4. Selecting mining software
  5. Joining a mining pool
  6. Optimizing payout

 

Introduction

The year is 2018, and you’ve probably heard of mining Bitcoin before. The absurdly competitive industry of “generating” new cryptocurrency by use of increasingly specialized, and profoundly expensive, hardware that is designed for one singular purpose. Bitcoin mining rigs will cost you an arm and a leg, but seemingly become obsolete the second you’ve purchased them. Many of us often simply imagine giant warehouses the size of literal coal mines. Facilities where millionaires store their loud, power-hungry, and constantly working drones which produce more heat than the surface of the sun. A community which makes it impossible for average members to ever make a profit, and a competitive space where the lights are never turned off.

 

Frankly, Bitcoin mining is no longer feasible for normal folks like you or me as it was never designed to stand the growth it has experienced. The optimal hardware to mine Bitcoin now is called ASIC (Application-Specific Integrated Circuit) and is specially designed for solving Bitcoin’s computational puzzles. Using your own (or off the shelf) CPU or GPU will simply result in much higher cost from electricity and excess hardware. The potential reward will never be worth the investment. Consequently, average miners are leaving Bitcoin behind.

 

What is Ethereum?

Ethereum is a blockchain-based platform which enables developers to build and deploy decentralized applications on top of the network. The advantage of Ethereum over Bitcoin is that it can support many different types of decentralized applications and general purposes. Applications are not just limited to basic financial transactions but become applicable to any particular industry.

 

Ethereum also has the second largest market cap after Bitcoin and has gained massive growth in the last year. The market cap for Ethereum (ETH) has reached over $100 billion and has a circulating supply 82.7% greater than Bitcoin.

Ethereum price from January 2017 to January 2018.

So what about mining on Ethereum?

Ethereum mining is similar to Bitcoin mining, in that miners will also have to solve complex cryptographic puzzles to receive their reward. Except, Ethereum’s Proof of Work algorithm requires not just computational power, but memory allocation as well. This reduces the competitive advantage of ASIC mining rigs over common GPU rigs. The result is a mining ecosystem which is resistant to the emergence of specialized hardware that favors bigger players and investments. So how do you get started with mining Ethereum?

 

Step 1: Generating an Ethereum Wallet

To store your Ether, you’ll need a digital wallet like any other crypto-currency. There are a lot of great wallets being maintained by the Ethereum community, which naturally has attracted a lot of talented developers given its mission. Among the most popular are the following:

 

https://www.myetherwallet.com/

https://jaxx.io/

https://metamask.io/

 

Depending on the wallet you’ve decided to use, the initial installation process will differ slightly. Some wallets will give you a series of words known as a mnemonic phrase, and others will give you a mixture of letters and numbers known as a private key. These can be used to restore your wallet should it ever be lost. Make sure to keep this data somewhere safe, and preferably stored offline.

 

After being given your recovery key/phrase, you’ll be given a public address for your Ethereum wallet as well. This address is common knowledge and can be shared openly with others. This address is where people will send you Ethereum, and can be thought of like a username or email address. Copy it down as well, because you’ll need this address to receive your mining proceeds later on.

 

Step 2: Selecting your mining software

There are several excellent options for mining Ethereum on your machine. Among the most popular options are EthMiner, Claymore, and EthOS.

 

About EthMiner

EthMiner is an Ethereum focused GPU mining worker with standalone executables for Linux, macOS, and Windows. Ethminer is a very simple command line program which requires a base knowledge of operating a terminal and takes very little time to set up. If you’re just interested in mining Ethereum and want to start slow, EthMiner is a great option.

 

About Claymore

Claymore is one of the most popular, if not the most popular, software options for quickly and easily getting your mining rig up and running. It offers extensive control features, runs very smoothly, and even allows for on-the-fly tweaking of certain parameters without needing to restart your machine. Claymore also has standalone executables for Linux, macOS, and Windows. If you’re comfortable with getting your hands dirty, Claymore is worth testing out. This miner is free-to-use; however, there is currently a developer fee of 1% for Ethereum-only mining and 2% for dual mining.

 

Note: If you don’t have a modern graphics card with the appropriate amount of RAM, you should use EthMiner. Claymore only works with higher-end cards like the RX 470, 480 or 580 with at least 2GB of RAM (and some others), as well as the top-of-the-line cards made with Nvidia hardware.

 

About ethOS

EthOS is a pre-configured Linux distribution that is specially customized for mining Ethereum in a highly optimized fashion. It’s rather convenient for new miners that want to make an outstanding setup of their mining rig in short amount of time. EthOS is not a free Linux distribution, but the advantage of ethOS is that it’s hassle-free. There’s no installation of drivers, compiling code, creating scripts, and so forth. After you have booted ethOS on your SSD or USB memory drive you’re good to go. Once you turn on the rig, EthOS starts running and detects all of your hardware. There’s a minor amount of configuration, but the process is very seamless at $39 for a digital download.

 

Step 3: Joining a mining pool

While optional, cryptocurrency mining payout can be a very unpredictable income for solo miners. If you mine independently, you’ll always be competing with giant teams of powerful miners. For this reason, it’s much more profitable to join a mining pool where proceeds are split among users. You can think of a Mining Pool as a co-op. To simplify, being a part of this pool allows you to receive a consistent payout for the work that you provide. They usually offer a simple sign-up process which allows you to specify your payout address, track your progress, and tweak some settings. There are several large pools to select from in Ethereum, so here are a few to start:

 

ETH Nanopool

This is a popular mining pool which rewards its contributors through a PPLNS Reward system. This system has a 1% fee + 5 Finney per payout (0.001) fee.

 

MinerGate

This is a relatively new pool where you can mine Bitcoin, Ethereum, Ethereum Classic, Litecoin and other CrytoNote-based currencies at the same time. CryptoCurrencies such as Monero, Bytecoin, DigitalNote, Dashcoin, Infinium, and more are also supported. MinerGate is the first pool which provides such a service for merged mining, often called “dual mining” without a decrease of hash-rate for major coins. The pool even utilizes a friendly GUI application and can be a great option when trying to diversify your investments.

 

ETHpool

This mining pool is a predictable-solo mining pool for Ethereum. That means that 100% of the block reward will be credited to the miner that contributed the most work on the pool for a specific block. The reward is paid out automatically after ten confirmation on the Ethereum blockchain and provides an interesting approach to pooling.

 

Other Mining Pools

There are thousands of different mining pools for Ethereum, all of which offer unique advantages and disadvantages. It would take an eternity to compare each of them comprehensively, but https://investoon.com/mining_pools/eth provides a great service for breaking down some of the core differences and traits between popular communities.

 

Step 4: Increasing your Payout

Congratulations! At this point in the mining process, you should have generated your Ethereum wallet, configured a device to mine Ether with one of the provided software solutions, and joined a mining pool that fits your specific requirements. So what’s next?

 

Dual mining cryptocurrencies

“Dual mining” is a popular trend in the cryptocurrency space presently. With dual mining, you can combine the mining process of multiple cryptocurrencies such as Zcash, Sia, Monero, and more without having to sacrifice significant processing efficiency. This is a great option for diversifying your portfolio and is easy to establish with tools such as Claymore and EthOS. Different cryptocurrencies will pair better, but profits largely depend on betting on cryptocurrencies you believe will appreciate more.

 

Investing in better hardware

One logical conclusion to increase your payout is to improve the hardware made available to your mining rig. There are two basic approaches miners can take when it comes to investing in new hardware, and there’s no single correct answer. As a miner, you can choose to buy a preconfigured set of hardware, or you can choose to build your own custom arrangement. The profitability of each option largely depends upon your experience building computers, the time you’re able to allocate, and the base knowledge you possess about optimizing hardware performance. Miningstore.com hopes to provide the right resources for everyone, and offers several pre-configured machines in addition to custom rig cases and bulk GPU orders.

 

Preparation for Proof of Stake

Casper is a proposal for slowly consolidating Proof of Stake into Ethereum. Proof of Stake will eventually replace mining (Proof of Work) altogether, but not before working side-by-side with existing systems to ultimately enhance the potential profitability of today’s growing mining community. Understanding Casper can help you maximize your long-term investments, and get the most out of your mining rigs.

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A LETTER FROM OUR FOUNDER: Why we’re all-in on crypto mining

JP Baric owner-miningStore.com

Hello! I’m JP Baric, the founder of MiningStore.

Everyone and anyone looking to take care of their money should be researching cryptocurrency at the moment, it very well might be the next evolution of money as we know it.

This guide is what I send to all of my clients who inquire about Bitcoin and the industry I play in. An investment that pays its return up to 50 times faster than real-estate is no joke, with the potential to turn a massive profit quickly depending on how you manage your portfolio.

Consider the following –

  • Cryptocurrency is here to stay

Blockchain technology and the innovation that Bitcoin was able to bring to world of finances is unprecedented. This technology is going nowhere, and as more capital and great minds enter the space, we’ll continue to see projects that push our industry forward.

  • Bitcoin is on the rise

 While there may be fluctuation from month-to-month, nobody is doubting crypto’s steady growth since Bitcoin’s 2009 launch. Just look at this chart from CoinDesk…

Bitcoin started 2017 at under $1,000. We’re still super early in BTC’s lifespan, and the growth we saw this year we’ll continue to see in the coming years. Don’t miss out while we’re still early.

  • Blockchain technology is the real deal

The entire cryptocurrency ecosystem revolves around Blockchain technology, and in-turn, activity from miners. While some might choose to treat an investment in crypto as investing in a security; investing in mining hardware is the better bet worth taking. Hardware itself maintains value while also giving you the freedom to choose which coin to mine at which time. It’s why we here at MiningStore simultaneously run a large-scale Ethereum mining farm in Washington. We’re seriously behind the idea that mining will provide us the single greatest return on investment possible.

Our faith in the concepts that I just presented is why we built our Imperium and Nexus mining rigs – we wanted to create the most efficient rigs possible for our own mining operation. And because of the inevitable demand, we’ve chosen to start offering our privately-used build to the public.

As a thanks for showing interest in what we’re doing, we’d love to offer newsletter subscribers $100 off our IMPERIUM professionally-built rig. Click here and use code “THANKS” to claim your gift.

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The Power of Imperium: The #1 Mining Rig on the Market

MiningStore Imperium Rig

Cryptocurrency has only been active for seven years, and those who have been involved in the community are looking to boost their income by doing more than just trading. Personal Etherium and ZCash Mining rigs are your next step and can do great things for your bank account. Whether you’re looking to build a rig or buy one that is pre-made, it’s hard to be sure you’ve found the best deal when there are so many options.  So what options make sense for you as a consumer?

Building Your Own Rigs

Buying parts online to build your own rig could be expensive and moves your return profit farther and farther back the more parts you buy.  If you don’t have the best graphics cards, it may not even be worth the power to run your rig at all. Furthermore, building your own rig is a hassle, finding out it isn’t working properly could mean testing each part to figure out the problem and dealing with multiple vendors to return the broken pieces, it postpones you having a finished product even longer, and still doesn’t guarantee that it will work correctly.

Buy Online

Buying a mining rig in its entirety from a vendor can be just as difficult as building a rig depending upon the vendor.  Choosing the right vendor is essential in finding the best deal, the wrong vendor could mean settling for an under qualified and overpriced product. Most of the time, the vendors don’t even have their own website, sending a couple of thousand dollars to someone selling rigs on sites like eBay, or Bonanza is belittling and hard to follow resolve issues once sold.

MiningStore 1300 a Reliable and Quality Rigs

Between its reliable guarantees, and outstanding product, MiningStore’s 1300 Watt IMPERIUM is the best rig on the market. Professionally and thoroughly built, these rigs are packed with eight graphics cards, 4GB of DDR4 RAM, two 750w power supplies, and more. Not only is there a 28-day guarantee for the entire rig and a 90-day 24-hour support team, but there is also an extended year-long warranty on each graphics card, guaranteeing your rig will be complete.

The Power of IMPERIUM

On average the IMPERIUM mining rig makes around $299 a month, depending on the market, paying off your investment in just over a year. Over 2000 units have been sold since our company’s conception in 2015, so product returns are few and far between.  There is no other rig as reliable and powerful as the IMPERIUM for such a low price.

This is displayed below, comparing Imperium’s technical capabilities to other plug-and-play options on the market.

Brand MiningStore IMPERIUM TryMining Supermicro
Price $3,700 $5,000 $3,744
Graphics Cards 8 570/580 GPU 3 overclocked GPU 1 G200eW GPU
CPU Intel CPU Intel CPU Intel CPU
RAM 4gb of DDR4 4gb of DDR3 4g of DDR3
Power Supply 2 750 watt 1 1000watt 1 1600 watt

To make the deal even better, we’re giving YOU a special discount just for reading this article. Use code POWER to get $100 off any order of an Imperium miner. Click here to view our product page and to learn more.

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What is the best GPU for Crypto Mining (Sept 2017)

miningStore.com miners

I’ve had quite the experience shopping around for cards, testing hashrates, voltage settings, etc. and have developed a keen understanding of mining GPU’s through extensive programming experience.

The most stable cards for mining are NVIDIA because they never crash. AMD’s cards are reliable and allow for customization due to removed safety parameters. Simplemining offers OC options for NVIDIA that are user friendly and recommended for beginners.

Claymore’s dual-miner software allows for a 13 GPU system with 13 different customizable cards. Theoretically, if you kept finding different cards you could keep mixing and matching; or even adding them all if you have enough ports.

Top performing AMD cards are the 4 series and 5 series. Some cards offer just under double the hashrate, but are more than triple the cost. Some mining sites (like Miningstore.co) have released AMD GPU’s with OC settings programmed into the firmware of the cards. Avoid any manual hacking to avoid killing your graphics card and shop through reliable retailers like Miningstore.co for the warranty value. These OC settings are not available on NVIDIA cards due to the aforementioned safety parameters, but AMD’s more open point of view allows for a nearly 30% increase on hashrate and 10%-20% voltage decrease (power cost reduction) on the 4 and 5 series AMD cards (great for miners and gamers). These settings can also be built into your card to avoid requiring programming from Afterburner and Trixx. Saving power cost and increasing the capabilities of your card is a win win, and the 4 and 5 series AMD cards do it best.

Knock this out quickly as possible as large-scale mining operations are buying up every card they can find. Newegg, Amazon, eBay, Intrex, TigerDirect, Best Buy sell out rapidly upon receiving new shipments. The best way to purchase if you want to OC them through the firmware is to purchase through major retailers with pre-installed settings. Minigstore.co is the top retiler for this purpose. Be sure to check out formums for GPU mods to get this done free, but be careful risking to kill your card. Some users charge a few hundred dollars just for the firmware settings not including the card.

All in all, at the current mining scene, AMD 5 series cards, especially 8GB RAM cards are the way to go. Namely, the Sapphire Nitro+ RX 580 8GB and MSI TWINFROZR RX 580 8GB are reliable, powerful, and easy to tweak, making them the best option for mining coins.