Blockchain 101: How Do Miners Make Money?
by Josh Anderson
TORONTO, ONTARIO — Blockchain is changing the way we think of currency and the way that some are building data centers. But this revolutionary technology has a lot of moving parts, and for many, they are less than transparent. So at CapRE’s Canadian Data Center Summit in Toronto last week, Founder and CEO of CapRE moderated a panel titled Blockchain, Cryptocurrency and Bitcoin: What are They and How Do They Impact Data Center Design, Construction & Development? The panel featured input from Ahmed El-Nady, National Director for Data Centre Infrastructure at Trane Canada ULC.
“Why don’t we talk a bit about what the miners do and how they actually make money,” suggested Klebash to El-Nady. “Fundamentally, what does a bitcoin miner do in the day to day?”
“In laymen’s terms, basically, Bitcoin is based on cryptography developed by NASA, which is based on SHA265-bit encryption” replied El-Nady. “When it started, basically, it was a decentralized blockchain register. So, what you do is different than a bank. A bank has your information such as a name, address and social security number. A bitcoin blockchain has an address, and that address is related to how much money you’ve got. And that’s based on the hashing of 265-bit encryption.”
He then looked to his co-panelists for an example of how this works. “For example, Roger [Karam, Chief Executive Officer, Northern Investment Partners Inc.], Roberto [Montesi, Vice President, INAP] and Michel [President, Kelvin Emtech] will have their own servers that are decentralized. That’s basically the blockchain of the whole process. Where, if I want to send money to someone in here, all I have to do is give the address. My address and the address that I’m sending money to – Roger, Roberto or Michel.”
“That’s basically hashed, or encrypted,” he continued. “It’s very easy to carry that encryption and very hard to break that encryption. In that case, when it goes, when that transaction goes, Robert, Roger and Michel, being the servers in the equation, they have to confirm that more or less all of that transaction is valid. It’s not corrupted and it’s not a fraudulent transaction.”
“When they started in the beginning, that’s all they had to do – solve that little bit of an equation and confirm it, and then back in 2008 when it started, there were 15 bitcoins [awarded] per confirmation,” recalled El-Nady. “Now that there are more servers, it’s becoming harder and harder. Whereby you have to solve a mathematical equation, which is becoming harder and harder, of course. And once you confirm and solve that equation, once the first person does that, nowadays they are awarded 12 and a half bitcoins.”
According to El-Nady, the system will generate one bitcoin every ten minutes. “That for everybody to fight for,” he clarified. “The total system, when talking about bitcoin specifically, they are programmed to generate 21 million bitcoin, and that is going to end in 2046, if I remember correctly. Now, the ones who have the servers, the distributed servers on the blockchain, the first one to solve that equation and confirm that transaction, gets that 12 and a half bitcoins, and that’s how you make money on the entire process.”
Banner Photo (L): Ahmed El-Nady, National Director for Data Centre Infrastructure, Trane Canada ULC