Which Mining Algorithm to Opt For?
A detailed review of the different Algorithms used for mining various ALT Coins and their features.
If you are reading this blog, then you must be looking to make profits via Cryptocurrency mining. After doing research, you might have zeroed on which Altcoin is profitable to mine. But then, comes the next hurdle, which algorithm to use?
What, I was not expecting this?
I thought I am done researching!
These might be the thoughts in your mind. Don’t worry! You would find some of the answers in this blog (if not all). So, I am assuming that you are a cryptocurrency enthusiast and know the basics of Blockchain, Cryptocurrency, and Mining. But let me briefly run you through these.
Blockchain is the underlying technology on which cryptocurrency operate; cryptocurrency is a decentralized digital cash developed for peer-to-peer global exchange with no or very less transaction fee. Blockchain eliminates the middlemen, and since there are no middlemen to verify the transactions, there is a need of a mechanism of validation. This mechanism of validation is performed by specialized nodes (participating computers in the network) by the process of mining.
In mining, all the miners in the network compete with each other to solve a ‘mathematical puzzle’ to validate the transaction that decides their order (in a block). The first miner to solve the puzzle declares it to the network and gets the reward. Now, let’s quickly focus our attention on mining algorithms.
You might have already heard about SHA–256 and Scrypt algorithm, the most popular of them. With more and more altcoins getting created every day, the number of mining algorithms used are also growing. Today, there are numerous algorithm used in mining various cryptocurrencies, but we are going to limit ourselves to top 5 of them. Read on:
SHA–256
The algorithm used in the first cryptocurrency i.e. Bitcoin. As you have guessed, the roots of this algorithm flow from the previous works. SHA is a group of algorithms issued as a security standard by NSA (National Security Agency) of the United States in 2001 (SHA-2). The first algorithm (SHA-0) was released way back in 1993, followed by SHA-1 in 1995. Presently used versions of this algorithm are SHA-256 and SHA-256D.
SHA stands for ‘Secure Hash Algorithm’ — in simplest words, a calculation method designed to make sure that information has not been altered from its original form. The information can be anything, ranging from the transaction details to a data bock. The ‘256’ represents the data digests that the algorithm generates. The SHA-256 translates and encrypts a specific piece of data into a 256 bits code. A bit is the smallest unit of data in a computer, it is a binary digit (takes either ‘1’ or ‘0’). Typically, it requires 2256 different combinations to break a 256-bit encrypted message, which is virtually impossible to be broken by even the fastest computers. SHA-256D just take an extra step further and doubles the encryption.
Scrypt
Scrypt is an algorithm that uses passwords to secure data. It is computationally intensive and provides security mainly based on the amount of memory required to complete operations i.e. time-memory trade-off. For a legitimate user, it is just fraction of a second. However, if someone tries to break the algorithm using brute-force method, then the operation would take hundreds of times more memory to complete operations.
X11
X11 is algorithm uses 11 different rounds of hashes to secure cryptocurrencies and their transactions. It is one of the most sophisticated cryptographic hashes having the advantage of a multi-hash system. This implies that in order for the algorithm to fail, all eleven of its hashes would have to fail at the same time.
Cryptonight
CryptoNight was originally implemented in the protocol ‘Cryptonote’ that allows increasing privacy in cryptocurrency transactions.
Ethash
Ethash is a modified version of the previous algorithms of ‘Dagger’ and ‘Hashimoto.’ It is utilized for Ethereum-based cryptocurrencies and uses ‘Keccak’ hash function standardized to SHA-3.
How exactly these Algorithm work in Proof-Of-Work Consensus Mechanism?
Blockchain is trustless. It means that you don’t need to trust the other party in order to do the transaction. It also doesn’t have a central authenticating authority, like a bank, to validate the transaction. Then, how it arrives at a decision that ‘someone’ has given ‘something’ to ‘someone else,’ and that the ‘someone else’ is in the possession of the ‘something’ and not ‘someone.’ In a blockchain network, it is done through consensus.
The consensus is met by the algorithms whose function is to make sure certain conditions are met. For example:
· The initiator of the transaction (‘someone’) is in possession of the funds being transferred.
· He/She has obtained the ‘something’ by one of the ‘valid’ means.
· As a result of the transaction, the recipient (‘someone else’) will now be recognized by everyone as being in possession of the ‘something’ being transferred.
· As an outcome of the transaction ‘someone’ would not be able to present itself as being in possession of the ‘something’ anymore.
The consensus also implies that there is a ‘common knowledge.’ In simpler words, explaining via above example, after the transaction is complete, ‘someone’ knows that ‘something’ is in ‘someone else’ possession. Also, ‘someone’ also knows that ‘someone else’ knows that ‘something’ is in his/her possession.
References
https://www.coinpursuit.com/articles/an-in-depth-look-at-cryptocurrency-mining-algorithms.179/
http://www.bitcoinlion.com/cryptocurrency-mining-hash-algorithms/
