Hello fellow steemians, it's been another wonderful week and a great pleasure to attend this week's lecture. All thanks goes to the Almighty Allah and also a big thanks goes to Professor @awesononso who took his time and make sure to digest this lecture to our understanding. This lecture was really helpful as I learned a lot from it.
Below is my homework submission post.
When we talk about mining in cryptocurrency, it has to do with how new coins are passed into circulation. Mining is a component which is very critical but aims at maintaining and developing the blockchain ledger. Mining is done is by solving very hard and complicated computational mathematical problems using very complex computers.
New cryptocurrencies are published in to circulation only through mining. This means that miners are practically minting currency. Let's take Bitcoin as an example; aside from the first block which was generated by Satoshi Nakamoto(genesis block), all other single blocks or bitcoin which came into being is through mining. Assuming there was no miners, Bitcoin would still be in existence and also useful as a network but there would not be an addition of new bitcoins. This clearly shows that mining in cryptocurrency is very important in the world of crypto.
After the contribution of miners to the mining process, a reasonable amount of coins are rewarded to the miners by the blockchain. Miners are always rewarded with the coins after they finish adding a new block of transactions to the blockchain. This process of rewarding miners is known as Block Reward.
This rewards is decreasing or reducing each and everyday because of how complicated and difficult the process is. Considering Bitcoin for instance, the mining process was very simple in the year 2009 because the miners at that time was very few which directly make the number of transactions carried out to be quite small. But as more people joined in the mining process, the number of transactions that takes place will increase making the mining process more difficult and complicated.
The term Bitcoin halving can be explained in a simplest form as a process where by the rewards of miners are reduced by half in order to maintain the Bitcoin value as well as prevent the Bitcoin inflation. The rewards of miners are deducted by half automatically in the Bitcoin blockchain after every 210,000 blocks.
The first halving of Bitcoin was able to decrease an amount of 50BTC to 25BTC, and this process took place on the 28th of November, 2012. The second halving was able to reduce 25BTC to 12.5BTC and this process took place on the 9th of July, 2016. The third and the recent halving occurred on the 11th of May, 2020 where 12.5BTC was reduced to 6.25BTC. This process reduce the rewards of every miner once in every 210,000 blocks. This is basically referred to as Bitcoin halving.
- In question 2, I have indicated that miners play a major role in the verification of transactions as well as the addition of valid and authentic transactions to the blockchain. Due to the halving process of cryptocurrencies, the rewards this miners earn are reduced each and everyday. Because there is a reduction in the rewards earn by miners after every 210,000 blocks, the profit that the miners were to earn after every 210,000 blocks will reduce.
- Strong and effective computers are needed to recover the earnings that was received previously due to the constant decreasing of the dividends for the transaction process.
- Another effect of halving on miners is that, the costs involved in maintaining and repairing the equipments use in mining is very high. This makes it very difficult and tedious for miners to carry out daily transactions.
- Another effect of halving on miners is that, the rewards they earn after each transaction process is not sufficient because there is an increment in the amount of energy used in the mining process.
- A lot of users and miners are of the doubt whether this mining process will forever last due to the supply of the coins. An example of a currency in doubt is the Bitcoin because of it's ultimate supply.
To open or have access to the Bitcoin explorer, I am first going to visit Blockchain.com.
The next thing is to click on Bitcoin as shown below.
- You then click on the icon I highlighted below.
- You then click on the Bitcoin explorer icon.
- We all can now see clearly the height of the block on the Bitcoin blockchain. From the screenshot below, the recent block height is 696831.
As I already stated above that Bitcoin halves after every 210,000 blocks and we also know that Bitcoin halving has occurred three times since the genesis of Bitcoin. From this information, we can calculate for the block to be formed next from in a simpler way.
Let's see how to calculate for the next block.
We know that Bitcoin already halves for 3 times, so the next block to be form will be the fourth block, this implies that we will multiply 210,000 and 4.
- 210,000 × 4 = 840,000
As I already stated, the current block height in the Bitcoin explorer is 696,376 as shown in the screenshot below.
So the number of blocks before the next halving can be calculated by subtracting the recent block height from the total height for the next halving as shown below.
- So we have, 840,000 – 696,376 = 143,624
This therefore implies that, we still have 143,624 blocks to create before the next halving can occur.
For me, I think the inflation of steem will one way or the other have an effect on currencies like Ethereum and Bitcoin.
This is because, there is a pair between Steem and Bitcoin as well as Steem and Ethereum in the Binance Exchange. And this Binance Exchange is not just a small exchange but a bigger exchange that trades millions of dollars of Steem in ETH or BTC pair. So whenever it happens that there is a constant reduction in Steem inflation, there is an apparent increase in it's value. At this point, investors who holds a huge amount of steem can sell them to buy a huge amount of BTC. Considering the reduction rate of Steem inflation in this perspective, we can realize that it can affect other coins.
To open or have access to the Steem explorer, I am first going to visit steemscan.com.
The next thing is to click on the Latest blocks. This icon helps the user to find the recent height of a block on the Steem blockchain.
We all can now see clearly the recent height of the block on the Steem blockchain. From the screenshot below, the recent block height is 56,565,546.
As we already learned that for every 250,000 blocks, Steem reduces it's rate of inflation by 0.01%. This means that we have to look out for the number of deductions in order to be able to calculate the next 0.01% deduction.
The first thing to do now is to find the recent Block height of Steem which we already found to be 56,565,546 using the Steem explorer. Check the screenshot I put below.
In order to get the number of deductions to be able to calculate the next 0.01% deduction, we have to divide the recent block height by 250,000 as shown below.
- So we have, 56,482,001 ÷ 250,000 = 225.92
This simple mathematical calculation means that, the rate of Steem inflation has reduce by 0.01% in 225.92 times.
Rounding the answer above to the nearest whole number, we can say that the next 0.01% reduction will be the 226th reduction.
This next reduction can be calculated easily by multiplying 250,000 by 226.
- So we have, 250,000 × 226 = 56,500,000
The number of blocks to be form before the next 0.01% reduction can be calculated by simply subtracting the recent height of the block from the the total height as shown below.
- So we have, 56,500,000 – 56,482,001 = 17,999
From the above mathematical calculation, it means that we still have about 17,999 blocks to be created in order for the next 0.01% reduction to occur.
a.) how many satoshis would you have?
b.) what is the value of a satoshi for that day?
(Show full working and correct to 3 s.f)
(1 satoshi = 0.00000001 BTC)
How many satoshis would you have?
The current price of Bitcoin from the coinmarketcap at the time of my analysis is $49,115.04. Below is a screenshot from the Coinmarketcap showing the recent price of BTC.
So assuming I bought an amount $2,500 worth of BTC, I can calculate for the BTC size by simply dividing the amount purchased by the current value of Bitcoin. This is mathematical statement is shown below.
- So we will have, 2500 ÷ 49,155.04 = 0.0509009053
This indicates that I have made a purchased of 0.0509009053 BTC for $2500.
To find the number of Satoshis, we have to divide the purchased BTC size by 1 Satoshi
And 1 Satoshi = 0.00000001
This implies that we will have, 0.0509009053 ÷ 0.00000001 = 5,090,090.53
This also implies that, I have made a purchase of 5,090,000 satoshis for $2,500.
We can find the value of a Satoshi for that day by simply multiplying the current value of BTC by 1 satoshi.
- So we will have, 49,115.04 × 0.00000001 = 0.0004911504
This implies that, the Satoshi value for the day is $0.000491 (3 s.f)
a.) how many Jagers would you have?
b.) what is the value of a Jager for that day?
(Show full working and correct to 3 s.f)
(1 jager = 0.00000001 BNB)
The current price of the Binance Coin from the coinmarketcap is $454.82. Below is a screenshot from the Coinmarketcap showing the recent price of BNB.
So assuming I bought an amount $30 worth of BNB, I can calculate for the BNB size by simply dividing the amount purchased by the current value of BNB. This mathematical statement is shown below.
- So we will have, 30 ÷ 454.82 = 0.0659601601
This implies that, I have made a purchase of 0.0659601601 BNB for $30
To find the number of Jagers, we have to divide the purchased BNB size by 1 Jager
And 1 Jager = 0.00000001
This implies that we will have, 0.0659601601 ÷ 0.00000001 = 6,596,016.01
This also implies that, I have made a purchase of 6,600,000 Jagers for $30.
We can find the value of a Jager for that day by simply multiplying the current value of BNB by 1 Jager.
- So we will have, 454.82 × 0.00000001 = 0.0000045482
This implies that, the Jager value for the day is $0.00000455 (3 s.f)
Mining of coins is really helpful because new cryptocurrencies are introduced into the system only through mining. Also, mining is a component which aims at maintaining and developing the blockchain ledger. So in general I will say mining is good and helpful to the blockchain.
A very special greetings and appreciation goes to Professor @awesononso for this important lecture. I can attest to the fact that, I have learned a lot through this lecture as well as through making my own research.
Thank you.