Homework on Mining and Proof of Work - Questions

Blockchain and Bitcoin 101
#304

  1. Why is it important to make sure that miners spend money (on electricity) while mining?
    They need to be incentivized to follow the rules in order to receive block rewards and transaction fees in the situation that they solve the puzzle and create the next block. If miners do not follow the rules, they will be out the money that they spent on the electricity.

  2. Why would it be very difficult for someone to go back change a previously added block?
    Because it would invalidate all blocks in the chain which would then need to be solved for again by running through nonce’s for each block until it has solved for all of the blocks all the while competing against the existing hash power of the network.

  3. How does the network regulate mining difficulty?
    It lowers the target as the hash power increases.
    Or raises the target as the hash power decreases.

1 Like
#305

Homework on Mining and Proof of Work - Questions

  1. Why is it important to make sure that miners spend money (on electricity) while mining?
    That is the concept of Proof Of Work. Miners have to proof that it took a certain calculation effort to find a block. The resource you will need for that is electricity. When finding a block miners will get rewarded with the block reward and the sum of all transactions in the block as well. Miners are important, because they secure the Bitcoin network. First miners are at a loss, if they use electricity and could not find a block yet. But in order to get the block reward (and the transaction fees) miners have to stick to the defined rules of the network. If miners do not stick to the rules, they cannot get a reward at all, because a block containing an error will be rejected by the network. In this case they will be left with empty hands and the electricity bill. Therefore miners will have a strong incentive to stick to the rules of the network, because in this case they will be able to find a block and get the corresponding reward. Using this reward, they will be able to pay the electricity bill and they can keep the rest as thier revenue.

  2. Why would it be very difficult for someone to go back change a previously added block?
    Blocks in the blockchain are linked together, because the data of each block contains the hash of the previous block. If you change a transaction in a block, you will also change the hash of this block. Due to the fact, that the hash needs to be below a certain target, this block has to be mined again. The links to all the succeeding blocks will be broken as well, because all the following hashes will change as well. So this someone has to calculate not only the block he changed, but all succeeding blocks as well in order to convince the network of his version of the blockchain (fork). But the problem is, that in the meantime the rest of the network keeps producing new blocks. So this malicious actor must catch up with the current version of the blockchain and mine even the next block first to change the blockchain to his version. In order to perform such an attack you will need at least 51% of the hashrate of the whole Bitcoin network. But nowadays it would be impossible to accumulate such a high hashrate. Furthermore you could make more money by sticking to the rules of the network and receive your rewards. So it has already become too risky and too expensive to perform such an attack on the Bitcoin network. However forks of Bitcoin are vulneralbe to these attacks, because their hashrates are so low, that such an attack becomes feasible.

  3. How does the network regulate mining difficulty?
    Calculating a block for the Bitcoin network should take about 10 minutes on average. Difficulty will be adjusted every 2016 blocks. To mine 2016 blocks should take 20160 minutes. 20160 minutes are 336 hours and 336 hours are 14 days or two weeks. If it takes less than two weeks to mine 2016 blocks, the difficulty will be raised. If it takes more thank two weeks to mine 2016 blocks, the difficulty will be lowered. So the network will adjust the difficulty every 2016 blocks towards 10 minutes block time.

2 Likes
#306

To incentivize them to keep the network alive.

Because than all the hashes and other blocks would be messed up, loose connection, and has to mine it again.

It sets up a target… When the target is low, the difficulty is high.

1 Like
#307

  1. It is important that miners spend money on electricity because, otherwise there would be nothing to keep them accountable.

  2. It would be incredibly difficult to change a previous block because every block is linked together with the one before it, and a change to one block would cascade down the chain.

  3. The network adjusts mining difficulty every 2016 blocks based on the average block time. It attempts to maintain a 10 min average.

1 Like
#308

You’re really doing an amazing job with your homework

#309
  1. It is important that miners spend money on electricity to make sure they will abide to the rules. Infact, spending money, they will have to chase the economic incentive to cover expenses which is the block reward. The only way to get it is to consume electricity to guess the nonce.
  2. If you try to corrupt the data inside a previously added block, you would have to hash it again to get it confirmed, this would break the link to all the subsequent blocks since their hash function would be changed consequently. Although this is theoratically possible, it turns out that it would be pratically impossible since it would require several thousands years to mine al the subsequent blocks.
  3. Target difficulty depends on the number of miners in the network. The more miners in the network, the lower is the difficulty target. The lower the difficulty targer, the harder it is to guess the nonce to be hashed with the transaction list and the hash function of the previous block.
1 Like
#310

Thank you. I am doing my best. Maybe my explanations are too long sometimes, but for me it is important to have a deeper understanding about these topics. Watching these videos makes me think more about the content and helps me to get this deeper understanding.

1 Like
#311
  1. Why is it important to make sure that miners spend money (on electricity) while mining?-so that miners have their skin in the game. If the miners were not made to spend money then everybody will start mining and the difficulty level will go super high and nobody will be able to mine. Also miners are not made to spend money upfront, they will not care about constantly keeping the network running. They might shut down their computers anytime they want since it is not costing them anything. So its important that miners treat mining as a serious and ethical business in which they have to spend some capital and constantly work so that they can get their capital back and also make profits
  2. Why would it be very difficult for someone to go back change a previously added block?- it is physically impossible to change the transaction in a previous block and then catching up with the longest blockchain. Miner who tries to change the transaction will always be catching up and keep on spending electricity but will never be able to add blocks. So practically it does not make sense to change the transactions in the previous blocks.
  3. How does the network regulate mining difficulty? More the miners, more the difficulty and lower the target and vice versa
1 Like
#312
  1. Money spent on electricity is the incentive to be honest it would be an expensive and time consuming process to have to start again .
  2. All figures would change and all forward blocks would have to remined otherwise the blocks would be invalid and rejected
  3. Mining difficulty is adjusted by by lowering or making the target higher . The more miners hashing the lower the target number and the less miners the higher the target number.
1 Like
#313

  1. Miners know the only way to be incentivised is to follow the rules. Any deviation will inevitably cost them money in used electricity.

  2. Changing the previous block breaks the chain. In order to catch up with other miners afterwards would be virtually impossible due to the amount of time it would take.

  3. More miners increases the difficulty of the hashing. The network also regulates the difficulty to keep the mining of blocks more or less to ten minutes apart.

2 Likes
#314

  1. By spending money on electricity to mine they are encouraged to play by the rules. They have invested money on electricity and equipment so they want to earn bitcoin in return.

  2. Because they will have to re-mine the block that they have changed and then mine all the other ones, whilst the blockchain will still continue to be mined by the rest of the network of miners. Therefore would be practically impossible to do that and catch up with the longer chain.

  3. The more miners are mining the lower will be the target and the more difficult it will be to get the mining reward. On the other, if suddenly there is less minors, the target will adjust and will be easier to get the mining reward.

2 Likes
#315
  • Why is it important to make sure that miners spend money (on electricity) while mining?
  1. Its like putting Investment skin in the game to incentivize honest behavior. It is also the proof of their work as the electricity spent on the power needed for hash functions secures the network and rewards the good mining behavior. If mining was cheap, many people would probably attack the network more often to a point of destroying the pow chain physically or socially.
  • Why would it be very difficult for someone to go back change a previously added block?
  1. This is where immutability in bitcoin comes from. If the tiniest bit of information change that happens on any previous block, the hash will change which alters any blocks after it. Every block from that block on, would have to be re-mined and consensus approved by more than 51% of the network. Not likely to happen and very very expensive.
  • How does the network regulate mining difficulty?
  1. The more miners mining bitcoin, the higher the hash rate to solve the nonce. The higher the hash rate/difficulty, the lower the target #. The hash must be less than the target #. If the target # is very low, the more guessing/rejecting goes up and the harder it is to solve the puzzle.
2 Likes
#316

  1. Because if they break the rules they will not only miss blockreward and fees, the will also loose money on the electricity cost that is high.

  2. Because since a block is based on hash in previous blocks, all blocks after the changed block will be broken and they will have to remine those blocks plus all the newly created blocks that other miners have mined after.

  3. The miner must find the nonce number to generate a hash number that is below the target. The target is a random number between 0 and infinity, and the closer to zero the target is harder to find a hash number below. A very high target number will be easier to find as the probabilities increases.

1 Like
#317
  1. To make them not play around and just be honest and get their worth of money.
  2. They have to remine every block and the blockchain would have been adding way more block than they can.
  3. With a target, the lower it is the harder it get the higher the target.
#318

  1. Why is it important to make sure that miners spend money (on electricity) while mining?
    To create intrinsic value to the process (PoW): The electricity costs spend, forces the miner to ‘play by the rules’. Solving the nonce provides BTC in return, and increases the security of the network since it makes the miner accountable for his actions.

  2. Why would it be very difficult for someone to go back change a previously added block?
    By changing a block in the past, requires all the newer blocks to be re-mined again - since the hash would also change (the links to the newer blocks break). The older the block to be altered, the more difficult it gets - the security of the network increases by time (every so many thousand blocks)

  3. How does the network regulate mining difficulty?
    When the block creation time reduces (below the desired 10min/block), then the network adjusts the mining difficulty.

1 Like
#319

  1. To keep then working harder then the next miner to rec the reward

  2. It would take to much time and electricity

  3. It is determine by the amount of miners on the network at that time and will increase the increase and or decrease according to the # of miners connected

#320

  1. The miners are incentivized to play by the rules by paying up front money (electricity) while mining, otherwise they won’t earn any money but instead they lose a lot in electricity while competiting to solve the cryptographic puzzle.

  2. If someone does that to a block, the link that chains that block with the next one will be broken because when that link was created, it was based on the content of the block as it was. Also all the next links on the Blockchain will be broken since the puzzle is also based on the previous links.

  3. The mining difficulty is regulated by lowering the target number. The more people do mining the smaller the target number will be.

1 Like
#321

  1. It helps ensure that miners attempt to be honest by financially punishing them for not finding the next block.

  2. Each block is based on the hash of the previous block so changing a previous block means also re-mining each subsequent block.

  3. After every 2016 blocks that are mined the difficulty is regulated to ensure that blocks are mined every ten minutes on average.

1 Like
#322

If mining was a cheap process, they wouldn’t be penalised for being bad actors in the system. The money they spend on electricity is also an incentive to keep to the rules set by the protocol. If they create a bad block that has a double spend in it, the network of nodes will most likely reject that block, so the amount of money the owner of the miner had spent on electricity is a loss. Also he will lose out on the block reward and transaction fees.

Because the changed block would be rejected by the network as its hash would change. This would create a ripple effect on the subsequent blocks. He would have to mine a lot of blocks with high efficiency to be able to catch up with the ongoing longer chain.

When there are more miners mining, the block creation time can be reduced, as more computers are trying to hash a number below the target. To keep the average block time around 10 minutes, the protocol reduces the target number, so the difficulty of finding a number below target, increases.
When there are less miners online, the block creation time goes up, so the protocol adjusts the difficulty by raising the target number.

1 Like
#323
  • Why is it important to make sure that miners spend money (on electricity) while mining? Ensuring that miners spend money makes them have skin in the game.
  • Why would it be very difficult for someone to go back change a previously added block? Changing a block would change each subsequent block, and the changer would have to redo all blocks subsequent including ones that are still being created.
  • How does the network regulate mining difficulty? The network regulates mining difficulty by adjusting the level of difficulty; a high level of difficulty means a lower nonce, therefore a smaller range of acceptable values to get a block accepted.