1. Solving the problems associated with Bitcoin mining
Adam Lalani (M00549948)
University of Middlesex
Dubai Campus
CCM4300 Computer Networks, Wireless and Mobile Communications Systems
Abstract— Bitcoin is a digital currency built around a
peer to peer network that uses open source software.
Due to its design, it involves the requirement of ever
increasing levels of computational power to maintain
the network and its transactions between users. Two
different solution approaches are evaluated, revolving
around the use of improved/additional hardware
(either through ‘bespoke silicon’ or miner botnets) and
mining pools. Both approaches have been scrutinised,
with the conclusion that a hybrid approach using
elements of both is the optimal solution given the
current constraints.
Keywords— Bitcoin, Bitcoin mining, FPGA, GPU, ASIC,
botnet, CDN,
I. INTRODUCTION (BACKGROUND REVIEW)
BITCOIN is a wonderful example of distributed computing. It is
a digital crypto-currency that is built around a peer to peer
network (P2P) using open source software [1]. The first
documentary evidence of Bitcoin was posted online in late
2008, by one ‘Satoshi Nakamoto’, (believed to be a
pseudonym) and the Bitcoin system went live soon after, at the
start of January 2009 [2]. All transactions are maintained in a
public ledger that is called the ‘blockchain’ [3]. The
blockchain is made up of a series of sequential blocks in
which each new block that is added references and refers to
the previous created block – thus a blockchain [4].
Every freshly created block is comprised of a set of
transactions that contains details of payments that have been
made between Bitcoin users as well as a ‘proof-of-work’ since
the last created block. The proof-of-work component requires
that members of the network perform the repeated
computation of a cryptographic hash function in order to
discover an acceptable digital string that is based upon the
SHA-256 [5] standard, created by the NSA, to bundle together
the new transactions since the last block into a newly created
block. [6] [7]
Fig. 1 - A simplified view of the Bitcoin Blockchain [8]
The proof-of-work for a given block is based upon all the
previous work performed on all previous blocks – therefore it
makes the likelihood of tampering with historical transactions
infinitesimally small, as a would be interloper would have to
go back and recompute each and every prior block in the
blockchain. The users of the Bitcoin network compete to
complete the required proof-of-work before another user is
able to do so. The reward for being the first to solve the hash
puzzle and for the acceptance, by the other nodes, in the
network of a new block, is the receipt of a number of newly
created Bitcoins. This is referred to as mining [9]. Due to the
computational power required to perform the undertaking of
the mining task, the reward or payment in Bitcoins is the
incentive for the users/peers of the network to continue to
remain on the network and support the creation of new blocks
in the blockchain by devoting their hardware resources to that
task [10].
Bitcoins are exchangeable with real world currency [11].
Therefore, the mined Bitcoins that are rewarded as a result of a
user’s commitment of hardware, time and expense towards
solving the complex proof-of-work necessary to maintain the
blockchain have a tangible financial benefit. This benefit,
however, is somewhat tempered by the wildly fluctuating
currency exchange rate between Bitcoin and the US dollar,
and requires nous on the part of the miner to know when to
start and when to stop mining, based on their cost(s) to do so.
When a Bitcoin network user provides their hardware
resources to help maintain the integrity of the blockchain, it
causes them a problem. This is because when new miners join
the Bitcoin system, and add their additional processing ability
and capacity towards the computation of hashes, the difficulty
in each subsequent new block created also exponentially
increases [12] - this has been built into the design of Bitcoin,
primarily to ensure the integrity of the blockchain, by making
it as difficult as possible to tamper with its integrity.
Therefore, it is of value and importance to a prospective (or
existing) Bitcoin miner to establish better ways to improve
their likelihood of creating new blocks over other competing
miners, and therefore receive new Bitcoins as their reward.
II. LITERATURE REVIEW
As Bitcoin was only conceptualised in 2008, and went live
when the first block was mined on 3 January 2009 by Satoshi
Nakomoto himself [13], there has, perhaps surprisingly, been
quite an impressive number of IEEE papers and articles
already published that have focused on various aspects of the
Bitcoin system. Some have looked at how information is
propagated within the Bitcoin network [14], its underlying
architecture [15], Bitcoin transaction security [16], who makes
up the ‘Bitcoin community’ [17] and how it is theoretically
possible to increase the speed at which transactions within the

2. network could be cleared/added to new blocks faster than the
usual 10 to 60 minutes [18].
Whilst these papers all considerably add to the body of work
and the overall picture of Bitcoin, the task at hand is to focus
on methods for miners to improve their probability of creating
new blocks and therefore receive newly minted Bitcoins.
Thankfully, a number of researchers have put their time and
efforts into answering this question – shining the spotlight on
several different methods – ranging from legal to illegal.
Based upon the literature review, two general areas have been
identified that ought to be better scrutinised as to their
suitability as solution approaches. It should be noted that
within these two broad solution approach areas there are
indeed further subsets that will be discussed and debated.
Solution one, and its subsets, revolve around how hardware is
or can be utilised – either through the use of ‘bespoke silicon’
[19] - hardware that has been especially created and/or
optimised to faster mine for Bitcoins or, alternatively, the use
of the processing power of pre-existing mining ‘able’
hardware [20].
The second solution, is based upon the idea of ‘mining pools’
– where individual Bitcoin miners join together to generate
blocks, with the workload being broken up and distributed
between the pool participants, with the share of Bitcoins that
are generated being distributed amongst the pool members
based on their processing power contribution which they have
added to the pool [21].
In both cases, there are pros and cons to the solution
approaches, which may also include some illegal or underhand
methods that can be harnessed in order to maximise one’s own
revenue and undermine the revenue of others. This will also be
examined.
However, it should be noted that when using scientific papers
there are a number of provisos in doing so. First of all,
because IEEE papers go through a vigorous review process
before publication is allowed, a substantial amount of time
(especially when considering a fast changing landscape like
the one that Bitcoin inhabits) may have lapsed and the data
and information may either no longer be valid, or already be
obsolete - having been superseded by yet to be published
work.
Additionally, each paper may specifically be focused on a
narrow research area within the greater topic itself, which then
requires these papers to be in effect ‘stitched’ together to
provide the whole picture – that in itself is a laborious and
time consuming undertaking. These narrow research areas
could also perhaps be due to the self-interest of the
researchers, who might conceivably additionally have a vested
interest in guiding the body of literature in a certain direction.
Finally, another important factor is the exclusivity factor that
journal publications have sought to create, where their limited
number of accepted papers have led to accusations that the
publications act “…like fashion designers who create limited-
edition handbags…” [22] – such restrictive policies could lead
to valid work being neglected and/or overlooked for
publication.
III. EVALUATION OF SOLUTION APPROACHES
As discussed in the literature review, two solutions (with sub-
solutions within) were identified and will now be examined in
greater detail.
Hardware utilisation is the first method that can be used to
tackle the problem. It had been previously alluded to in the
introduction that when additional hash processing power is
added to the Bitcoin network the difficulty in block creation
also rises. At the start of the Bitcoin era, using a desktop-
standard central processing unit (CPU) to compute hashes was
quite acceptable until resourceful miners realised that by using
a graphics processing unit (GPU) the hashing rate was
significantly improved [23]. This is due to the fact that GPUs
are optimised for parallel processing versus a CPU’s serial
based approach [24].
However, this solution method proved to be short lived when
in 2011 miners realised that using field-programmable gate
array (FPGA) based setups was even more efficient, allowing
the FPGAs to be specifically and optimally configured for
Bitcoin mining and therefore producing much better hash rates
[25]. With every upside, there is of course a downside – in this
instance FPGAs consume much more power than GPUs.
Electricity consumption is actually one of the greatest
impediments to Bitcoin mining [26]. Whilst this paper is not
necessarily concerned with the dollar value of Bitcoins, the
miners involved are. There have been times that when the
Bitcoin v US Dollar rate has plummeted, miners have turned
off their hardware – due to the fact that the cost of their
electricity would outweigh the value of the coins they have
mined [27].
Another financial consideration is that these FPGAs have a
low resale value [28]. Once the hardware has become
obsolete, the monetary return when disposing of them is low.
However, with GPUs, there is a strong secondary market on
auction sites like eBay quite simply because they can be used
for other purposes besides mining for Bitcoins.
The next step in the hardware evolution of Bitcoin mining was
the use of application-specific integrated circuits (ASICs) [29].
The research available has shown that, on average, an FPGA
consumes approximately 14 times more power than a similar
specification ASIC, as well as a similar FPGA being 35 times
larger in size than its ASIC equivalent and roughly 4 times
slower [30]. These numbers are highly significant for miners –
you can keep many more ASICs in the same area space, using
much less electricity and therefore one is able to keep mining
when the Bitcoin exchange rate has reduced below the break-
even point for FPGA based miners, a major competitive
advantage.
Currently, ASIC based mining is the most effective way of
legitimately mining for Bitcoins, striking a good balance
between the cost of initial hardware purchases, running costs
such as electricity and the higher hash rate achieved when
mining, and thereby producing Bitcoins at a more profitable
rate.

3. So far, from a hardware perspective, only legitimate means of
mining have been examined. There are however, groups of
resourceful (but illegally operating) miners who have created
botnets in order to surreptitiously harness and utilise the
available processing power of many thousands of unknowing
users of PCs and mobile devices. This is not by any means a
new phenomenon with published research on the matter dating
back to 2011.
Fig. 2 - Bitcoin mining evolution [31]
One such paper analyses a so called ‘Miner Botnet’ [32]
Cybercriminals are undoubtedly motivated by opportunities to
make money, so it stands to reason that using resources
belonging to others without them knowing to mine for
Bitcoins is one such scenario for them to contemplate. The
particular malware injected by this botnet was multi-
functional, so in addition to mining for Bitcoins it could
further generate revenue by stealing social network
credentials, and auction the provision of pay-per-install (PPI)
services to the highest bidder and be used for DDoS attacks.
The malware operated on a 4 tier level - tier one being
comprised of command and control (C&C) servers, on the
second tier were distribution servers that were trusted peers of
the C&C servers, plus they also acted as fall-back servers for
tier one in case the original C&C servers were taken down by
law enforcement authorities. Tier three’s function is to act as a
content delivery network (CDN) in order to distribute
commands, lists and updates to tier four who are the workers
performing the role of mining slaves in this particular Bitcoin
focused scenario.
Fig. 3 - Miner botnet infrastructure [33]
This botnet was so elegantly constructed, that it even
benevolently downloaded the latest GPU driver updates on the
tier four slave machines so as to better optimise the hash rates
generated by their graphics cards. Updates to the malware
occurred at a fairly regular frequency, furnished by tier
three/the CDN. The CDN also provided status reports as well
as data that had been extracted up to the tier two distribution
servers. At its peak, the botnet was observed to have some
200,000 devices under its control, with an average of 23,000
available and online at any given time.
In a sense, this botnet operated as its own private mining pool.
This conveniently brings us to the second method of
improving one’s ability to mine for Bitcoin – the use of
mining pools.
Mining pools are essentially groups of Bitcoin miners working
together by pooling their combined computational resources
together. Usually, this is implemented by a ‘pool manager’
and pool member miners [34]. The manager, rather than
performing ‘proof-of-work’ themselves, breaks up the task of
block generation between the pool members, thereby
accepting partial ‘proof-of-work’ which, based on the rate at
which each member miner submits its partial work, allows the
‘pool manager’ to estimate the contribution of each miner in
the pool.
Revenue from the mining operations are received by the
manager, who then fairly distributes the revenue amongst the
miners based on the previously mentioned estimate of their
work contribution. This method of group mining allows for
regular guaranteed pay-outs to reward them for their group
contribution [35], as the pool is much more likely to create a
new block together than if one individual member with
comparatively limited processing power mined alone. Most
‘pool managers’ make a relatively small deduction to the pay-
out as an administrative fee [36].
There is however also an attack vector with pool mining. This
is called a ‘pool block withholding attack’ [37]. In this method
of attack, the attacker joins a targeted rival pool as ostensibly a
genuine miner. Once joined, tasks that have been issued by the
victim ‘pool manager’ to the infiltrator are referred on to other
miners controlled by the infiltrating group. When the
infiltrator(s) create their partial proofs of work they are passed
on to the targeted ‘pool manager’ who uses this to estimate the
contribution to the legitimate mining pool. However, if a full
proof of work is generated, it is not passed on. The net effect
is that the compromised pool’s rate of mining has not changed,
but the share of the revenue is reduced and divided amongst
more miner pool members.
IV DISCUSSION AND FURTHER WORK
Clearly, the solution approaches that were investigated and
evaluated have upsides and downsides. With the hardware
improvement method, an initial large investment has to be
made to purchase the latest, most capable, hardware –
hardware such as ASICs will quickly become obsolete and
have little value once they have served their purpose. It does
not end there, as a miner has to carefully consider their energy
costs versus the dollar value of Bitcoin at any given time. That
said, this type of mining, when planned carefully and
appropriately, provides a quicker return on investment.
The mining botnet solution to the hardware quandary, putting
the legality issues aside, is an imaginative way of overcoming

4. the obstacle of making an initial large investment. As has been
discussed, the botnet analysed has been so elegantly
constructed, with fault tolerance built-in - even downloading
the latest graphics hardware drivers for its mining slave. If not
for the fact that it is criminal in its execution, it would have
perhaps been considered as an optimal solution.
Mining pools are perfect for the more risk-averse, hardware
constrained miner. Mining alone on inferior hardware may in
all probability take years to create a new block, whereas as a
member of a mining pool you have a guaranteed steady stream
of income, and achieve more short term revenue as a group
than individually. The downside being that pools can be
infiltrated and manipulated by rivals who are working against
the group interest. The likelihood of this happening, or its
current frequency of occurrence has not been subject of
research as of yet.
Suggested further work would certainly begin with research
into the aforementioned attack vector on mining pools, as this
could better inform the viability of the approach versus others.
On the hardware front, whilst ASICs seems to be the hardware
of choice for miners currently, is there another method that has
been thus far overlooked – and would research be able to
uncover it or be reactive to it? It is suspected that it would be
reactive research due to the relatively fast turnover of the
hardware used as mining devices.
Potentially, there may be other hardware devices already in
existence that have, as of the time of writing, not been
considered as suitable for Bitcoin mining that are indeed
viable. Computer networks are littered with devices such as
routers, firewalls and switches that are undoubtedly carrying
spare/excess processing capacity that could potentially be
utilised. This is another area for further research to be carried
out.
V CONCLUSIONS
Bitcoin is a demonstrably superb example of distributed
computing. However, due to the exponential increase in
mining difficulty, viable solutions have been sought after to
improve the likelihood of new block creation and the reward
of receiving Bitcoins.
The literature review has shown an already considerable
breadth of research in to Bitcoin in general, but with
thankfully enough research that has focused specifically on
resolving the increasing difficulties in mining.
The two solution approaches that were identified – using
better (or more) hardware or miners joining together in
collaborative efforts known as mining pools, have both been
investigated and critically evaluated. A further constraint
added to the mix is the consumption of and cost of electricity.
It is the opinion of the author that a hybrid of the two
approaches would be the most cost effective way of mining for
Bitcoins. This would involve using ‘bespoke silicon’ to mine
for Bitcoins alone until that hardware moves towards
obsolescence, after which joining this hardware to a mining
pool would continue to generate short to mid-term revenue
and avoid the losses of selling the hardware for very little of
what was initially paid for it so soon in its lifecycle.
Further research into the frequency and probability of attacks
on mining pools, as well as into the proposition of using
under-utilised or dormant network hardware is suggested for
future researchers to point their efforts towards.
It certainly appears that Bitcoin is here to stay, and hopefully
this paper will be of added value to the current body of work
or to prospective Bitcoin miners.
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