Cryptocurrency Mining Principles Flashcards
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Read the first 7 Cryptocurrency Mining Principles flashcards as text
What is 'cloud mining' and what is its primary risk for investors?
Answer: Renting remote mining capacity; risk includes fraud and lack of transparency
Cloud mining contracts let users rent hash power remotely, but many services are scams, and legitimate ones often underperform versus direct mining.
Which concept does 'uncle blocks' refer to in Ethereum's pre-Merge Proof of Work system?
Answer: Valid but non-canonical blocks that received partial rewards under GHOST protocol
Ethereum's GHOST protocol rewarded 'uncle' (stale) blocks to improve security and incentivize miners whose valid blocks were orphaned.
What environmental concern is most commonly associated with Bitcoin Proof of Work mining?
Answer: High energy consumption and carbon footprint
Bitcoin mining's massive electricity consumption, often from fossil fuels, contributes significantly to carbon emissions.
What is the 'coinbase transaction' in a mined block?
Answer: The first transaction in a block that creates new coins and awards them to the miner
The coinbase transaction is a special first transaction in every block that mints the block reward and sends it to the miner's address.
In the context of mining profitability, what does 'break-even point' refer to?
Answer: The moment when mining revenue equals total operational and equipment costs
Break-even point is when cumulative mining revenue matches total investment in hardware and ongoing operational expenses.
What is 'Stratum protocol' used for in cryptocurrency mining?
Answer: A communication protocol between mining hardware and pool servers
Stratum is a lightweight TCP-based protocol that efficiently connects mining software to pool servers, replacing the older getblocktemplate protocol.
What happens to transaction fees in Bitcoin after all 21 million BTC are mined?
Answer: They become the sole incentive for miners to secure the network
Once the block subsidy reaches zero (around 2140), miners will rely entirely on transaction fees as their compensation.