Jayton van den Berg


First of all, I think it is necessary for me to explain what mining is.
Anything involving coins is inseparable from mining. In the Ethereum network, mining is also required in order to obtain Ethereum. So when it comes to mining, it must be inseparable from the consensus mechanism.

Bitcoin’s consensus mechanism is PoW (Proof of Work). Simply put, the more you work, the more you get. The more computational work you put in, the more likely you are to be the first to find the correct hash, and the more likely you are to be rewarded in bitcoins.

However, Bitcoin’s PoW has certain defects, that is, the speed of processing transactions is too slow, and miners need to constantly collide with hash values through calculations, which is labor-intensive and inefficient.

In order to make up for the shortcomings of Bitcoin, Ethereum proposed a new consensus mechanism called PoS.

To put it simply, PoS is actually the same as its literal meaning: equity, equity, the more coins you hold, the more equity you have, and the higher the equity. The proof of equity of Ethereum is: the more coins you hold, the longer you hold the coins, the lower the calculation difficulty, and the easier it is to mine.

The consensus mechanism of Ethereum is indeed PoS, but PoS is only a plan or goal at the beginning of the release of Ethereum. The consensus mechanism adopted by Ethereum is also PoW, which is the PoW of Bitcoin.

In the initial setting of Ethereum, Ethereum hopes to adopt PoW in the early stage, gradually adopt PoW PoS, and finally completely transition to PoS to establish a relatively stable system.

So let me explain to you what is “Bitcoin”
Bitcoin is a decentralized, non-universal global payment encrypted digital currency, which is regarded by most countries as a virtual commodity rather than a currency. The concept of Bitcoin was born in a document signed by Satoshi Nakamoto in 2008, and was invented on January 3, 2009 by an open source software consensus initiative based on a borderless peer-to-peer network.

The Bitcoin protocol has a cap of 21 million to avoid inflation issues. The use of Bitcoin uses private keys as digital signatures, allowing individuals to pay others directly without going through third-party institutions such as banks, clearing centers, and securities companies, thereby avoiding high fees, cumbersome procedures, and regulatory issues.

The issuance of Bitcoin does not depend on a specific monetary institution, but is generated through complex calculations and encryption. This decentralized mechanism ensures that the issuance of Bitcoin will not be interfered by any individual or organization.
The number of bitcoins is fixed and 21 million will not be issued. First of all, we need to know that these 21 million bitcoins did not flood into the market all at once in 2009, but flooded into the market in the form of rewards. Every time a miner produces a block, they are rewarded with bitcoins.

Since Satoshi Nakamoto dug up the first block in 2009, miners who dug out a block will receive 50 bitcoins as a mining reward. However, the Bitcoin mechanism designed by Satoshi Nakamoto stipulates that every 210,000 blocks, the reward is halved. That is, from block 1 to block 210,000, each block rewards 50 bitcoins, and from block 2,100,001 to block 420,000, each block rewards 25 bitcoins.

If the output time of each block is 10 minutes, then the output time of every 210,000 blocks is about 3.99 years, which is about 4 years. That is to say, from 2009 to 2013, miners will receive 50 bitcoins as a mining reward for each block dug out; Mining rewards; From 2017 to 2021, miners will get 12.5 bitcoins as mining rewards for every block they dig out, and so on.

According to this halving calculation, after about 32 halvings, that is, around 2140, the reward for re-mining is less than 0.00000001 BTC, or even close to 0 BTC. So eventually, around 2140, all of the bitcoins will hit the market.

Then we can calculate, starting from the bitcoin reward in 2009, there are almost no bitcoins that can be halved by 2140, how many bitcoins have been rewarded in total?
Almost equals 21 million, so the total number of bitcoins is 21 million.
What is a Bitcoin node?
Bitcoin is a peer-to-peer electronic cash system, more directly, peer-to-peer. Each transaction is broadcast by nodes around the initiator. After the node receives it, it will broadcast to the surrounding nodes, and finally spread to the entire network.
Every Bitcoin wallet is a node, and a node with a complete blockchain ledger is called a full node.
In October 2017, there were approximately 9,300 full nodes in the Bitcoin network responsible for broadcasting and verifying Bitcoin transfer transactions. After the transfer transaction occurs, it will be broadcast to the whole network by all nodes. After the mining node verifies that the transaction is correct, it will record the transaction on the blockchain ledger.
The United States, Germany, and France have the most Bitcoin full nodes.
Since running a Bitcoin node does not provide any rewards and does not require full nodes to transfer Bitcoins, the number of Bitcoin full nodes is a fraction of the number of nodes.
From sending transaction to miner packaging
When you initiate a bitcoin transfer, you broadcast the transaction to the entire network. After the mining node receives the transaction, it first puts it into the local memory pool and does some basic verification, such as the bitcoins spent by the transaction.
Is it an unused transaction? If the verification is successful, put an “unconfirmed transaction” and wait for packaging; if the verification fails, the transaction will be marked as “invalid transaction” and will not be packaged.
That is to say, while competing for computing power, mining nodes need to verify each transaction in a timely manner and update their “unconfirmed transaction pool”. After the node grabs the bookkeeping right, it will extract about a thousand “unconfirmed transactions” from the “unconfirmed transaction pool” for packaging.
Sometimes our transactions cannot be packaged in time, because there are too many transactions in the “unconfirmed transaction pool”, and the number of transactions that can be recorded in each block is limited
An “unconfirmed transaction pool” is a way of storing unconfirmed transactions before the blockchain confirms bitcoins. We can compare it to a doctor’s waiting room. Mempool congestion means that there are many unconfirmed bitcoin transactions waiting for miners to confirm them on the blockchain, similar to a waiting room full of people waiting to see a doctor.
Today is just a preliminary sharing.
I will start from the most basic and gradually lead you to understand the entire cryptocurrency market in the simplest and most effective way, so as to achieve long-term sustainable profits
If you want to join a market, you must first be familiar with it, so today I will take the world’s first cryptocurrency – Bitcoin as an example, to explain cryptocurrency in depth.

An open distributed blockchain application platform that provides a decentralized virtual machine to process peer-to-peer contracts through its proprietary cryptocurrency, Ether. Allows anyone to build and use decentralized applications running on blockchain technology without any fraud, censorship, or third-party oversight. The concept of Ether was developed by Vitalik Buterin in 2013-2014 inspired by Bitcoin, with the aim of working together to build a more globalized, freer and more reliable internet

[Difference between Ether and Bitcoin]
Ether, like Bitcoin, is a distributed public blockchain network. While there are some major technical differences between the two, the most important difference to note is that Bitcoin and Ether have very different purposes and functions.
The Bitcoin blockchain is used to track the ownership of digital currency (bitcoins), while the Ether blockchain focuses on the programming code that runs any decentralized application.
In an interview on December 19, 2021, Raoul Pal, CEO of Real Vision, said that he believes Ether will replace Bitcoin as the leading cryptocurrency in the market. He further explained that both BTC and ETH benefit from Metcalfe’s Law. Metcalfe’s Law states that the value of any network is proportional to the square of the number of nodes in the network.” In addition, ETH fixing has reduced supply due to the large amount of ETH being burned, which has greatly increased demand, which is why ETH has outperformed Bitcoin by a factor of four.”
As a result, hundreds of millions of cryptocurrencies are targeting low-value currencies for investment in the New Year.
Who is the real person (alias Satoshi Nakamoto) who first came up with the concept of Bitcoin 14 years ago? Musk is trying to unravel the mystery. In the podcast, Musk suspects that the figure is computer scientist Nick Sabo, who proposed a decentralized digital currency called “bitcoin” in 1998 and is widely considered to be the precursor to Bitcoin.
Musk believes there is evidence that Sabo is Satoshi Nakamoto. Musk added: “Sabo says he’s not Satoshi Nakamoto, but I’m not sure that’s true. But he seems to be the biggest promoter of the idea behind Bitcoin.” Over the years, there have been many attempts to unmask Satoshi Nakamoto. The mask, Sabo, is one of a dozen possible candidates. But Sabo has repeatedly denied that he is “Satoshi Nakamoto,” and some theorists insist that there is more than one person behind the pseudonym “Satoshi Nakamoto.”
[Three major upgrades to ETH]

  1. PoS (Proof-of-Stake). Minimize the amount of ETH issued and maximize the democratization of ETH issuance opportunities.
  2. EIP-1559: The size of the Ether economy makes Ether increasingly scarce. As the Ether economy “catches fire”, more ETH will be burned. Conversely, as the Ether economy cools, less ETH will be burned.
    3.EIP-3860 : Ether will significantly increase the richness and diversity of smart contract functionality, and will be able to alleviate the current problem of smart contract bytecode length limitations resulting in some complex contracts having to be split into multiple contracts before they can be deployed to the main network.
    For many, the burn mechanism is intrinsically linked to EIP-1559, but the link is more subtle.EIP-1559 has two attributes, 1 it captures the economic value created by the use of the network; and 2 it removes that value from circulation.
    Other than that, the design space is quite open. Burning, redistributed to block producers, funds, remint tokens, etc. in an incentive-compatible manner. Attribute 2 is a choice inherent in the allocation problem (who gets the agreement fee).
    In my opinion, Destroy is a good “default” option unless there is a better option. I also believe burning is better than reallocating to the block producer. But I have a hard time proving that this is a necessary consequence of the EIP-1559 mechanism.
    What is the purpose of the Ether burning mechanism?
    ETH can become more valuable in two ways.
  3. it needs to be paid for on the Ethereum network.
  4. becomes scarce through destruction.
    “Token/token burning” is the process of permanently removing circulating tokens/tokens from the total supply. This is a fairly common practice in the cryptocurrency world. The main purpose of coin/token burning is to increase the price per unit.
    If the market is balanced between supply and demand, the price will steadily increase. The competitive environment is created by other tokens with limited supply. On the other hand, transaction speeds are increased, security is improved and the network structure is relaxed.
    How much is ETH worth?
    In the Ethernet network, ETH has a range of functions, including.
    Payments. Payment of Ether transaction fees (i.e., refueling fees) to specific retail stores or service providers.
    Collateral. Used as collateral in various decentralized financial applications such as MakerDAO and Compound.
    Lending: used as funds to borrow or lend (e.g. using the Dharma protocol).
    NFT: powered by Ether, allowing artists or others to sell art or other items directly to buyers using smart contracts.
    DeFi: by using Ether, centralized control of currency or other liquid assets by a centralized institution can be effectively avoided.
    Digital applications or dapps: Ether supports digital applications, including gaming, investing, money transfers, social media, and more.
    [The value of ETH]
    In an interview with The stabborg Talks, Ethereum Commons founder Vitalik Buterin said.
    “I think the biggest difference between Ether and Bitcoin is that Bitcoin is a platform where the value of the ecosystem comes from the value of the currency; in Ether, the value of the currency comes from the value of the ecosystem.”
    In addition, in the Ether 2.0 (Serenity) phase, users can pledge 32 ETH to become verifiers by providing computing resources to become security guards of the Ether network (so it is foreseeable that in the future, the Ether PoS mechanism will lock up a large amount of currently circulating ETH ).
    In addition to these practical values, ETH also has speculative value, i.e., value gained through speculative activities such as trading and investment behavior, which constitutes the main source of value in the cryptocurrency space as a whole.
    Cryptocurrency is a medium of exchange that uses cryptographic principles to secure transactions and control the creation of units. Bitcoin is the earliest and most iconic cryptocurrency. Bitcoin was the world’s first digital currency created using cryptographic algorithms and blockchain technology, and it can be said to have led the way.

Bitcoin has the following typical characteristics:

🔥 1️⃣ The issuance of Bitcoin does not depend on any state institution, decentralizing the issuance of money.
🔥 2️⃣ The total number of bitcoins is determined to be 21 million, and the rate of production is pre-determined (increasingly slow).
🔥 3️⃣ Bitcoin proves its ownership by means of a private key, and a Bitcoin account consists of a numerical address that is highly anonymous.
🔥 4️⃣ Bitcoin’s entire process, from creation to transaction, is recorded on the main blockchain and is highly traceable.
Compared to traditional currencies, Bitcoin’s most important feature is that it is generated by a pre-determined algorithm, the total amount is constant, and it is not issued by the central bank of a specific country.
Therefore, no country can collect taxes by issuing bitcoins, nor can they issue bitcoins indefinitely in exchange for real resources. In other words, the use of Bitcoin theoretically avoids inflation and asset price bubbles and ensures that the currency is not diluted by excessive central bank issuance.
Because of this, Bitcoin has been strongly sought after by investors in the financial markets in recent years, especially in light of the global liquidity glut. Since the outbreak of COVID-19, the price of Bitcoin has skyrocketed, exceeding $60,000 twice so far, and is currently trading at around $25,700.