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In the next article in this series on mining, we talk about mining and encryption algorithms.
Every cryptocurrency has its own encryption algorithm, which is used to create new blocks of network registries. There are many such algorithms today. And it's not so much a matter of wanting to create something of your own.
Bitcoin was originally based on the SHA-256 algorithm. Today, ASIC mining, which very quickly learned to use SHA-256 profitably, is considered one of the main threats to the principles of decentralization of blockchain and cryptocurrencies and to home miners.
That's why these three main challenges stand before the creators of new crypto algorithms:
- To fight back against ASIC dominance
- To allow home station owners to confidently mine on GPUs
- To protect the system from hacking and 51% attacks.
Let's talk about a few of the most famous algorithms that every miner should know about.
What is SHA-256 mining algorithm?
SHA-256 hash algorithm is an encryption mechanism created by the NSA. SHA-256 algorithm explanation, in a nutshell, looks like that: the key task of the algorithm is to convert random information into fixed-length values and use it to identify data.
All data fragments can get their own SHA-256 fingerprints to be protected with it. It is not possible to decrypt the transformed data because the hash sum is not treated as an encryption process in the classical interpretation of this procedure. The one-way encryption algorithm handles an unlimited amount of information.
This method of encryption has a lot of advantages:
- Data compression is performed promptly;
- It is impossible to roll back the conversion process without the keys;
- The probability of collisions is reduced to zero.
SHA-256 cryptocurrencies
According to CoinMarketCap this algorithm is related to 47 cryptocurrencies. Of course, the pioneer in this regard is Bitcoin. Apart from it, here are 5 most capitalized currencies with SHA-256 (at the moment of writing this article):
- Bitcoin Cash (BCH)
- Bitcoin SV (BSV)
- Peercoin (PPC)
- Namecoin (NMC)
- Litecoin Cash (LCC)
ProgPOW
One of the most famous alternative algorithms. ProgPOW is short for Programmatic Proof-of-Work. It was created in 2018 by a group of developers named “ifdefelse”. It is considered an ASIC-resistant algorithm and is very useful for GPU mining.
Its working model is that each iteration in the search for a solution to a problem is a randomly generated program based on the block number. It requires full use of the GPU resources and their potential. That's why there were a lot of discussions about utilizing ProgPOW for pools of GPU miners.
Part of the Ethereum ecosystem laid high hopes for this protocol, but it has still not been actively deployed. A vulnerability discovered in ProgPOW on March 4, 2020, delayed its widespread deployment again. Therefore, as of today, it is not so easy to find its implementation in real coins. However, back in 2018-2019, the algorithm was actively used in the Bitcoin Interest coin (BCI).
Scrypt algorithm
This is a popular adaptive cryptographic algorithm that was created as an alternative to SHA-256. It was written by FreeBSD security officer Colin Percival as a crypto-protection for online services to keep backup copies of UNIX-like operating systems.
Scrypt algorithm cryptocurrencies
CoinMarketCap shows 108 altcoins related to this algorithm in one way or another (at the time of writing). The most famous ones are Dogecoin (DOGE) and Litecoin (LTC).
Equihash
The cryptographic function implemented in this algorithm uses the concept of the birthday paradox. Here is the essence of this concept: in a group of 23 people there will be at least one pair with the same date of birth. And its probability is more than 50%. For a group of 60+ people, this probability is even higher - 99%.
Equihash coins
According to CoinMarketCap, Equihash is used in 6 well-known and lesser-known cryptocurrencies: Zcash (ZEC), Komodo (KMD), and others.
If you are going to use Equihash miner, note this: you can find the appropriate software to help you organize Equihash dual mining. It will help you to increase its efficiency.
Also, worth mentioning are algorithms like Ethash (used in Ethereum mining), CryptoNight, X-algorithms (X11 and higher, X16R), and many others.
Bottom line
GPU mining today is difficult to compete with ASICs, which has made GPU mining much harder. Moreover, there are serious concerns about "51% attacks" that already look quite real.
Against this background, the expansion of the range of alternative mining algorithms, providing both more protection and aiming for equal rights for different categories of miners, is a very welcome trend. Time will show which algorithms prove to be reliable and effective.
The content of this article is for informational purposes only and should not be construed as investment advice. We ask you to do your research.
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