Blocks & Transactions

Transaction data is permanently recorded in files called blocks. They can be thought of as the individual pages of a city recorder's recordbook (where changes to title to real estate are recorded) or a stock transaction ledger. Blocks are organized into a linear sequence over time ("Miner" or "Worker") also known as the block chain). New transactions are constantly being processed by Miners (into new blocks which are added to the end of the chain and can never be changed or removed once accepted by the network. Each block contains, among other things, a record of some or all recent transactions, and a reference to the block that came immediately before it. It also contains an answer to a difficult-to-solve mathematical puzzle – the answer to which is unique to each block. New blocks cannot be submitted to the network without the correct answer – the process of "mining" is essentially the process of competing to be the next to find the answer that "solves" the current block. The mathematical problem in each block is extremely difficult to solve, but once a valid solution is found, it is very easy for the rest of the network to confirm that the solution is correct. There are multiple valid solutions for any given block – only one of the solutions needs to be found for the block to be solved. Because there is a reward of brand new cryptocurrency units for solving each block, every block also contains a record of which address is entitled to receive the reward. Transactions are broadcast to the network by the sender, and all peers trying to solve blocks collect the transaction records and add them to the block they are working to solve. Miners get incentive to include transactions in their blocks because of attached transaction fees. The difficulty of the mathematical problem is automatically adjusted by the network, such that it targets a goal of solving an average of (X) blocks per time interval (details are specified in the respective consensus rules of a cryptocurrency). The network comes to a consensus and automatically increases (or decreases) the difficulty of generating blocks. Because each block contains a reference to the prior block, the collection of all blocks in existence can be said to form a chain. However, it's possible for the chain to have temporary splits – for example, if two Miners arrive at two different valid solutions for the same block at the same time, unbeknownst to one another. The peer-to-peer network is designed to resolve these splits within a short period of time, so that only one branch of the chain survives. The client accepts the "longest" chain of blocks as valid. The "length" of the entire block chain refers to the chain with the most combined difficulty, not the one with the most blocks. [Source: ]


Uncles are orphaned blocks that contribute to the security of the main chain, but are not considered the canonical "truth" for that particular chain height. They only exist in Ethereumbased cryptocurrencies. For more information on Ethereums uncle mechanism please review the relevant section of the Ethereum wiki under uncle-incentivization"> [Source:]

Block chain

Block chain is a decentralized and continually updated list of transactions occurring across a certain peer-to-peer network. Blocks of transactions are validated and linked together by specific methods of cryptography. Manipulating individual transaction records is hardly possible in this context. A blockchain provides a wide range of functionality. Besides establishing cryptocurrency and payment infrastructures, it can be used, for instance, to digitally sign documents (proving identity) or create verifiable records of business processes.


Mining is the process of adding transaction records to a cryptocurrencies public ledger of past transactions. This ledger of past transactions is called the block chain as it is a chain of blocks. The block chain serves to confirm transactions to the rest of the network as having taken place. Cryptocurrency nodes use the block chain to distinguish legitimate transactions from attempts to re-spend coins that have already been spent elsewhere. Mining is intentionally designed to be resource-intensive and difficult so that the number of blocks found each day by Miners remains steady. Individual blocks must contain a proof of work to be considered valid. This proof of work is verified by other nodes each time they receive a block. Ethereum uses the "ethash" proof-of-work function while Zcash uses the "equihash" algorithm. The primary purpose of mining is to allow nodes to reach a secure, tamper-resistant consensus. Mining is also the mechanism used to introduce new units of cryptocurrency into the system: Miners are paid any transaction fees as well as a "subsidy" of newly created coins. These both serve the purpose of disseminating new coins in a decentralized manner as well as motivating people to provide security for the system. Mining is so called because it resembles the mining of other commodities: it requires exertion and it slowly makes new currency available at a rate that resembles the rate at which commodities like gold are mined from the ground. [Source:] To ensure mining can be carried out reasonably, certain hardware demands are to be fulfilled; mining entails a high level of power consumption. The process of mining is conducted using specialized software available for different operating systems. Each cryptocurrency defines a unique mining reward scheme. For more information on the rewarding scheme employed by the Ethereum cryptocurrency please consult the Ethereum Yellow Paper under ; for more information on the Zcash rewarding scheme please consult the Zcash protocol specifications under . The intensity of the mining tasks is highly demanding; hardware components may – exceptionally – be destroyed completely. As the hardware setup of each Worker is individually compiled, you must assess (and bear) the risk associated with such high electrical load by yourself. As mining is an intensive task for the hardware of your computer (CPU, GPU), the process can cause high costs for electricity. 

Mining pools 

Mining pools pursue the objective to solve blocks more quickly and split the rewards equally. Participants of a mining pool presenting a valid proof of work are awarded a "share". A share is a hash, smaller than a specified difficulty, but generally without value as only the hash smaller than the target value solving a block and determined by difficulty is of importance. Mining pools are available in a range of forms and arrangements as well as for different types of cryptocurrency. Depending on the mining pool, various payout schemes may be applied.

Solo mining payout scheme

Each submitted share will increase the credits of the Miner who submitted the share by the fixed share difficulty of the pool. The Miner who accumulated the most credits will receive the reward of the next block that has been mined by the pool and his credits will be reset to his current credits minus the credits of the runner up Miner. "Uncles" are distributed in a similar way only that the credits of the Miner receiving the uncle reward will not be reset.

Pay-Per-Last-NShares ("PPLNS") payout scheme

This reward system is round based, whereby one round has an arbitrary number (N) of minutes. When a block has been found by the pool, the block reward is distributed according to the number and difficulty of the shares submitted during the last hour. Payout takes place immediately after the minimum payout amount of 1 "Coin" has been reached. However, the payout threshold may be customizable.

Pool fee

The pool fee to be collected by the service provider amounts to a uniform x% (0.5% up to 2%) calculated from the total mining rewards as defined by the cryptocurrency consensus protocol .


A Share is awarded by the mining pool to the clients who present a valid proof of work of the same type as the proof of work that is used for creating blocks, but of lesser difficulty, so that it requires less time on average to generate. [Source: ]


Ethereum is an open-source project establishing a decentralised platform running applications exactly as programmed. Downtime, censorship, fraud and third party interference are not possible according to the developers. Using a customized blockchain able to move values, Ethereum has an enormously wide application area and provides numerous options for developers. The platform facilitates the realization of so called smart contracts, allowing, for example, the automatic negotiation or enforcement of contracts. Ether, as the actual cryptocurrency, is a necessary element for operating Ethereum (payment for requested operations). It is also traded on cryptocurrency exchanges. Ethereum Classic is a split from the existing cryptocurrency Ethereum and Etherium Classic offer the same features. Both blockchains act individually.


Zcash ("ZEC") is a decentralised and open-source cryptocurrency with increased confidentiality. Despite payments are – as usual in connection with cryptocurrencies – published on a blockchain, the sender, recipient and amount of transactions are only visible to those people with the corresponding "view key" as these "shielded" transactions are specifically encrypted. In using advanced cryptographic technology, transactions can be verified without revealing additional information.

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