Mining Node

The primary role of a mining node is to propose and add new blocks to the blockchain. It does this by:

• Aggregating pending transactions from the mempool.
• Solving a computationally intensive cryptographic puzzle (the Proof-of-Work).
• Broadcasting the newly mined block to the peer-to-peer network for validation by other nodes.

Mining requires specialized hardware to compete effectively.

• ASICs (Application-Specific Integrated Circuits): Dominant for networks like Bitcoin, offering extreme efficiency for the specific hashing algorithm (SHA-256).
• GPU Rigs: Historically used for Ethereum (pre-Merge) and are still common for other PoW chains, offering more flexibility.
• Mining Pools: Individual miners often join pools to combine computational power (hashrate) and share rewards, increasing the chance of earning a consistent income.

Mining is incentivized by block rewards and transaction fees.

• The first miner to solve the puzzle receives a block subsidy (newly minted cryptocurrency, e.g., Bitcoin's 3.125 BTC).
• The miner also collects all transaction fees included in their proposed block.
• This reward mechanism secures the network by making honest participation profitable and attacks economically irrational.

While many networks have transitioned away from PoW, several major blockchains still rely on mining nodes.

• Bitcoin (BTC): The canonical example, using the SHA-256 algorithm.
• Litecoin (LTC): Uses the Scrypt algorithm, designed to be more resistant to ASIC dominance.
• Dogecoin (DOGE): Merged mining with Litecoin, using the same Scrypt algorithm.
• Monero (XMR): Uses the RandomX algorithm, specifically designed to be ASIC-resistant and CPU-friendly.

The security of PoW comes with significant energy expenditure.

• The competitive puzzle-solving process consumes vast amounts of electricity, leading to environmental concerns.
• This has driven innovation in renewable energy mining and is a primary reason for the industry shift towards Proof-of-Stake (PoS) consensus, as seen with Ethereum's Merge.

In Proof-of-Stake (PoS) systems, the block production role is performed by validator nodes, not miners. Key differences:

• Resource Staked: PoS uses locked cryptocurrency (stake) instead of computational work.
• Selection Algorithm: Validators are chosen pseudo-randomly based on the size of their stake, not a hashing race.
• Energy Use: PoS is orders of magnitude more energy efficient, as it eliminates the need for competitive computation.

The primary security threat to a Proof-of-Work network is a 51% attack, where a single entity gains control of the majority of the network's total hash rate. This allows them to:

• Double-spend coins by reorganizing the blockchain.
• Censor transactions by excluding them from blocks.
• Halt block production entirely. The massive computational cost required to achieve this acts as a powerful economic deterrent.

Mining nodes are economically incentivized to act honestly through block subsidies (newly minted coins) and transaction fees. This reward structure:

• Subsidizes the enormous capital and operational costs of mining hardware and electricity.
• Aligns miner profit with network security; attacking the chain devalues their own rewards.
• Creates competition, driving innovation in ASIC hardware and energy efficiency to maximize profit margins.

While individual miners join mining pools to smooth income, this creates a centralization risk. If a single pool controls >50% of the hash rate, it functionally enables a 51% attack. Key considerations:

• Pool operators control block template construction and transaction selection.
• Geopolitical concentration of mining power can lead to regulatory attack vectors.
• Protocols like Stratum V2 aim to decentralize power by allowing individual miners to choose transactions.

Proof-of-Work's security is directly tied to its high energy expenditure, which is often criticized. This creates a security-incentive dilemma:

• High energy cost acts as a barrier to entry for attackers.
• It also leads to centralization near cheap power sources and environmental concerns.
• The search for renewable energy and flare gas mining are responses to this critical trade-off between security and sustainability.

Beyond 51% attacks, miners can execute sophisticated protocol-level attacks. Selfish mining involves a miner withholding a found block to gain a strategic advantage over the public chain, potentially earning a disproportionate share of rewards. Other attacks include:

• Block withholding within a pool to sabotage competitors.
• Time-bandit attacks attempting to rewrite longer chain history. These are mitigated by protocol rules and the economic irrationality of such acts at scale.

A mining node's operational security is critical. Compromise can lead to hijacked hash power for attacks. Key defenses include:

• Physical security for ASIC farms against theft or sabotage.
• Network security to prevent DDoS attacks that could take nodes offline.
• Firmware integrity to avoid malicious updates that could reduce efficiency or redirect rewards. The node operator's security is a foundational layer for the network's overall health.

A full node is a network participant that maintains a complete, up-to-date copy of the blockchain ledger and validates all transactions and blocks according to the network's consensus rules. While all mining nodes are full nodes, not all full nodes are miners.

• Key Function: Independently verifies the entire blockchain state.
• Contrast with Miner: A full node does not necessarily perform the computational Proof-of-Work required to create new blocks.

Proof-of-Work is the consensus mechanism that mining nodes use to secure networks like Bitcoin and Ethereum (pre-merge). It requires nodes to solve a computationally intensive cryptographic puzzle to propose the next valid block.

• Purpose: Provides cryptographic proof that computational resources were expended, making chain reorganization attacks prohibitively expensive.
• The 'Work': The puzzle involves finding a nonce that, when hashed with the block data, produces an output below a specific target.

A mining pool is a collective of individual miners who combine their computational power (hashrate) to increase their chances of successfully mining a block and earning the block reward. Rewards are distributed proportionally to contributed work.

• Purpose: Reduces the high variance in rewards for solo miners.
• Role of Node: Individual miners in a pool run mining node software that connects to the pool's coordinating server, which assigns work units.

Hash rate is the total combined computational power being used by mining nodes on a Proof-of-Work network to process and secure transactions. It is measured in hashes per second (H/s).

• Network Security: A higher aggregate hash rate makes the network more secure against 51% attacks.
• Mining Difficulty: The network algorithmically adjusts the mining difficulty target to maintain a consistent block time relative to the total hash rate.

The block reward is the incentive paid to the mining node that successfully validates a new block. It consists of newly minted cryptocurrency (the coinbase transaction) plus the sum of all transaction fees from transactions included in the block.

• Primary Incentive: Compensates miners for their hardware and energy costs.
• Halving: In Bitcoin, the base block reward is cut in half approximately every four years in an event known as the halving.

An Application-Specific Integrated Circuit (ASIC) miner is specialized hardware designed solely for the purpose of performing the hash computations required for a specific Proof-of-Work algorithm (e.g., SHA-256 for Bitcoin).

• Efficiency: Vastly more energy-efficient and powerful at hashing than general-purpose hardware like GPUs or CPUs.
• Centralization Risk: The high cost and specialization of ASICs can lead to mining centralization, a key critique of PoW.