Homework on Mining and Proof of Work - Questions

Blockchain and Bitcoin 101
#1029

  1. As the miners have incentives for mining a new block and maintaining the chain, this is how the system is able to punish from ea-legal processes that miners may try doing, by making sure it will not be worth (money wise) hacking the blockchian."

  2. Because it would change the hash of the block witch will change the hash of all the blocks in front and represent them all as non legal, and he wound need to mine each and every block again.

3.Buy lowering the options of a right answer to the cryptographic riddle when there is high activity on the network to increase difficulty, and making the answer to the question easier by lifting the target, as the the miners riddle is the find a number lower than the target. The lower the target the less right options resulting in more need of calculating.

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#1030

  1. Miners are financially incentivized to follow the rules since they are spending money on electricity to guess the nonce in order to collect transaction fees and block rewards.

  2. Each current block contains the hash from the previous block before it. If you changed data from a previous block, the chain will be broken, and you would need to re-mine all the blocks. This is technically impossible.

  3. The more miners there are in the network, the mining difficult increases. This means that the target to solve the hash is low, which lowers the percentage of finding the correct hash.

#1031
  1. So they are motivated to make to money back
  2. They are all linked to each other and each block hash is based on hash of the block before it. They would have to re-mine all the blocks efter that block, because now all the hashes would look different in each block.
  3. The more miners, the lower the target.
#1032

Homework on Mining and Proof of Work - Questions

Why is it important to make sure that miners spend money (on electricity) while mining?

  1. It is the way Proof Of Work, works. Miners are incentives to make money by being honest when creating block in the blockchain. With a lot of hashrate needed to solve the cryptographic puzzle it needs a lot of power/electricity to solve the puzzle in order for the block/data that they composed to be selected into the block. If they are not being honest i.e allowing double spend utxo’s in there block this will mean there block will not be accepted into the blockchain and subsequently lose out on the incentives and have spent a lot on electricity.

Why would it be very difficult for someone to go back change a previously added block?

  1. Let’s say that someone changed the information on a previous block, they will have to solve a new cryptographic puzzle from that block/link to what was the next block. This puzzle is compiled from information from all previous blocks on the blockchain. To change a context in a block you will then have to re mine all previous blocks. This is not feasible to do, due to the amount of miners in the network continuing to add more new blocks on to the blockchain. You would have to have a lot of computing power to try and change the entire blocks and that would just be too much time. In POW the network will take the longest chain as the most honest blockchain.

How does the network regulate mining difficulty?

  1. With mining difficulty the miners are trying to figure out a cryptographic puzzle. The miners that are currently waiting on there block to be accepted on to the blockchain, they are trying to figure out the nonce (a random number) to match the unique hash (on there block) that it generated from previous hash and the Transactions list that currently in the miners block. The miner has a target that they have to get. They target depends on the difficulty on the network. The more miners on the network the less the target number will be. The less miners on the network the higher the target will be for the miners. Miners continue to keep guess using electricity meaning spending more energy until they get it below the target required for that block to be accepted on to the blockchain for miners to be rewarded with the block reward and transaction fees.
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#1033
  1. Why is it important to make sure that miners spend money (on electricity) while mining?

It is important to make miners spend because it gives them a financial incentive to play by the rules keeping the network secure. Earning block rewards for playing fair and selling them to pay for the electricity bill and maybe making a profit.

  1. Why would it be very difficult for someone to go back change a previously added block?

Because you would then need to change every block. Blocks are linked by cryptographic hash, if the data in the block changes the hash changes and all other blocks hash changes and the links are broken.

  1. How does the network regulate mining difficulty?

The network regulates the difficulty by the networks hash rate. the higher the hash rate the more difficult the puzzle becomes. Guessing a random number. (nonce)

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#1034
  1. To show that they worked to create the block.
  2. it gets exponentially harder the further back in the blockchain you go. You would have to beat the mining power of the whole network twice over consecutively within 10minutes to go back and change 2 blocks. So each block you go back you need the mining power of the whole network multiplied by how many blocks you want to go back in time, just to have a probable chance of changing it
  3. It lowers the target number to reach to increase difficulty and raise the target to lower difficulty.

When Ivan said it was between 0 and infinity i thought it was between 0 and 2^256 is this right?

#1035

  1. It is important incentivise miners to make sure they play by the rules and are rewarded for doing so.

  2. It is almost impossible for a miner to to go back and change a previously mined block because they would need to make the changes, correct all links and blocks following the change along with catch up to the current block. The network will always go with the Longest Chain. For these reasons its theoretically possible but HIGHLY unlikely unless the miner controls 51% of the hash rate.

  3. The network regulates difficulty by adjusting the Target. The more miners that are mining (or an increase in network hashrate) will in turn cause the network to decrease the target and make it harder to find the nonce.

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#1036

Mining Homework and Proof of Work - Questions

Why is it important to make sure miners spend money (on electricity) while mining?

Spending energy ensures that mining work is done according to the rules, basically committing the miner to do the right thing to guarantee the reward.

Why would it be very difficult for someone to change a previously added block again?

The cryptographic puzzles are based on the transactions and the content of the book, also on the previous hash information, if the information in the block is changed everything will be affected and it does not make sense to the miner. Spend time and money guessing and you won’t get a thing.

How does the network regulate mining difficulties?

It is regulated through the hash rate, a low target increases the difficulty, when many miners extract the crypto puzzle it becomes more difficult to solve, the rule is that the hash of the new block is below the target.

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#1037

Good! But how does this number affects the way blocks are mined?

#1038

Good job Aaron! Perfect answers!

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#1039

Besides being rewarded, what will happen if miners don’t need to spend money to mine blocks? ( tip: security of the chain)

#1040

Correct! But why is this important for the security of the network?

#1041

If the miners were not following the rules, it would be too expensive to cheat and change previous transactions. By forcing miners to spend money in order to mine, this secures the network.

#1042
  1. Why is it important to make sure that miners spend money (on electricity) while mining?
    To get rewarded. POW keep the miners honest by being honest they get rewarded.
  2. Why would it be very difficult for someone to go back change a previously added block?
    Because if one block is changed it will change the entire set of blocks make all blocks wrong.
  3. How does the network regulate mining difficulty?
    It make the Target low when Difficulty is high,
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#1043
  1. To decentivize them from cheating on the network.
  2. If anything is changed in the previous block it would break the link to the next and the following blocks.
  3. Target number is made low when there are too many miners making guessing nonce difficult. If less miners are present, guessing Nonce will be made easier by making target value high.
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#1044
  1. To secure the network by miners spending electricity, spending resources trying to guess the correct nonce and be rewarded with block reward and tx fees.
  2. Because all the information in the blockchain will change and the links will be broken. This is due to the fact that a single change in the info of a block will radically change the hash, thus changing the hash of the next block and so on.
  3. By changing the target which is a number set by the network, in order for a block to be accepted it has to be lower than said target. Thus, if target is low then difficulty is high, if the target goes up then difficulty is lowered.
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#1045

To give them incentives to mine fairly by following the rules and be rewarded when they do so. Failure to comply will result in more computations = more electricity = more money spent by mining = less profit

Because they would have to recalculate (process) the bock they have changed and all subsequent blocks that have been writen since (after that block) the changed block as all blocks are cyptographically linked together.

The difficulty is set and regulated by the nonce and target value which is used to define how many calculations a minor will have to perform to “guess” the correct nonce used in the previous block. The more minors mining results in a more mathmaticaly (probability) difficult problem of guessing that nonce.

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#1046

Hi Wafflemark,
Thank you for response. I think the lower the target is the probability of hitting numbers under gets more difficult. I mean now they need more time to mined a block. Is that ok?

Please correct me, if something is not right.

#1047
  1. Pow
  2. Secure the network; all blocks are related to eachother, change one thing in a block you’ll hav to change all the block + catch up with the new mined blocks.
  3. it regulates regulary so that each block is mined approximately every 10 minutes.
#1048

  1. Making the miners spend before they get any rewards from successfully appending a block creates a monetary incentive for the miners to abide by Bitcoin’s protocol (e.g., keeping previous transactions immutable) because rational miners will not work against the system and bear the consequence of being unable to recover the money they already spent.

  2. It would be difficult for someone to change previously added blocks because each block in a blockchain has a hash – a unique number that is correlated to the accuracy of the block and its relationship to the rest of the blockchain. The hash is calculated by putting all transactions in a block, the hash of the immediate previous block, and a random number (the nonce) through a hash algorithm. If any information in a previously appended block is changed, the original hash of that block will become invalid, which will lead to a cascading invalidation of the hashes of all blocks down the chain. For a change in a previous block to actually got accepted by the system, someone needs to mine again the changed block as well as all the blocks down the chain, which will be an impossible operation because of the steep price in time and computing power (i.e. money).

  3. The network regulates mining difficulty by changing the range of possible values for the nonce needed for successfully appending a block. The range becomes narrower if more people are mining, thus making mining more difficult. The range will be widened if there are fewer miners, and the difficulty of mining will become lower.