Blockchain 101: What is Hashing?
by Josh Anderson
ATLANTA, GA — CapRE has organized multiple panels about blockchain technology but the discussion at CapRE’s Greater Atlanta Data Center Summit last month surrounding the topic may just take the cake for most riveting. The panel, Blockchain, Cryptocurrency and Bitcoin: What are They and How Do They Impact Data Center Design, Construction & Development? included a discussion about the basics of blockchain and bit-mining. For example, what is is that a miner actually does? And how is it profitable? Panelist Ben Lorber, Chief Executive Officer of CircBit, was first to chime in about this topic.
“Hashing is what they are doing,” he replied. “They are trying to find something called a nonce. And that produces the next block. The block contains the transactions and all of the associated transactions. In order to find that nonce, you’re doing what is called SHA-256 Hashing. You’re constantly hashing all of this data, trying to find that has that is a certain length. Just to match a string of numbers that is a certain length. And it’s very, very long and so that comes with difficulty.”
In other words, according to Lorber, “It’s a brute-force kind of thing, where you’re just hashing and hashing until you find that nonce,” he asserted.
“So in order to do a SHA-256 hash with a block, we can do it in this room right now, which would take like 30 minutes to an hour for someone to actually do one hash,” continued Lorber, then gesturing to an actual mining server provided by a co-panelist on the table in front of him. “But these machines actually do it 12 and a half trillion times a second. So I kind of think of it like, it’s something that you’re doing an actual act of work – you’re just doing a hash – but you’re doing it very, very efficiently with this hardware.”
However, the crux of it all comes down to the implications. “That equates – most of the time – to just energy,” he shared. “People who are actually putting this in the data center are more concerned about how much energy this is going to cost, how to cool this thing, and also, mining is not a magic money-making machine. The market is extremely volatile, as we know. And you’re also competing with people worldwide. Right now, there are a lot of miners who just aren’t competitive. And that means a lot of people went offline. As prices go down it’s going to happen some more. But other people are expanding. Some people are really efficient at it so they’re going to keep expanding.”
At that point, Lorber’s co-panelist Allan Williamson, Principal for At Home Crypto LLC, chimed in. “I just want to say really quickly, one thing about the difficulty is that, a few years ago, when I first started with this, I was able to take Raspberry Pis, daisy-chain them together, and mine Bitcoin,” he shared, with a chuckle. “That was, what? 2.6 gigahertz of processing power? But then so many more people got involved, that today, if you look at this, this is 12.3 terra-hash that we have to do now.”
“That’s because more and more people are added to that mining environment that are confirming the transactions,” he explained, preparing to wrap up his remarks. “That’s what they mean by the difficulty of the transactions going up. So people on an older model, with only 4.3 terra-hash, a year ago, you’d get 3 bitcoins a year. now, people are pulling out these 4.3 terra-hashes like this because that 2000 watts that they’re spending on power usage, they could run these for a year and they might make half a bitcoin, maybe. So right now it’s just not profitable for them to do that. So that’s what we mean by the difficulty changing.”
For more coverage of this panel, check out previous CapRE Insider Reports:
- Maybe Blockchain and Bitcoin Are Too Interconnected to Differentiate Them
Blockchain 101: Securing the Network, with Ben Lorber, CircBit
- How is Blockchain So Secure and What Problems Does That Solve?