What is the CryptoNight mining algorithm and how does it work? Cryptocurrency scrgruppen

Understanding mining algorithms

Mining algorithms are the backbone of blockchain-based networks such as Bitcoin and other protocols.

In blockchain technology, mining algorithms are essential for transaction verification and network security. The mining algorithm instructs mining computers to follow a set of rules to create a valid block.

Proof of Work (PoW) is the well-known consensus algorithm used by Bitcoin and other cryptocurrencies. In Proof of Work (PoW), miners compete using computational power to find a specific hash value that will give them the new block. Application-specific integrated circuits (ASICs) are the specialized hardware needed for miners to be competitive in such a power-intensive process, but before ASICs, low-bandwidth CPU and GPU mining equipment was used by users. At home.

ASIC mining primarily uses the SHA-256 hash function, which was designed by the US National Security Agency (NSA) and published in 2001 as a data integrity standard. Bitcoin uses SHA-256 to ensure maximum security and integrity, as the slightest change to the algorithm would alter the output of the mining hash function.

To keep up with industrial-scale mining operations, many miners join mining pools to combine their computational power, thus increasing the chances of successfully mining a block. Block rewards are shared proportionally based on each member’s contribution.

Choosing a mining algorithm is a crucial decision for a cryptocurrency project, because it defines the rules and requirements needed to create and secure the blockchain network, beyond how participants are rewarded with newly minted coins. Examples of other popular mining algorithms include Ethash, used by the Ethereum blockchain network, and CryptoNight, used by the Monero network.

What is the CryptoNight algorithm?

CryptoNight is one of the fastest mining algorithms and is part of the CryptoNote consensus protocol.

CryptoNight is a Proof-of-Work (PoW) mining algorithm for CPU and GPU mining, designed to be ASIC-resistant to prevent centralization of mining power. It hopes to help users mine more efficiently using a set of hash functions, including CryptoNight and Keccak hash functions.

Its cryptographic hash function runs on the Advanced Encryption Standard (AES), a military-level algorithm for extreme security, making CryptoNight a mining algorithm that is highly security-focused. Since Monero began using it as a hashing algorithm for its blockchain consensus, CryptoNight’s reputation as a security algorithm across the cryptocurrency world has strengthened.

The creation of the CryptoNight algorithm is fascinating and reminiscent of the origin of Bitcoin. Its creator – who bears the fictitious name Nicholas van Saberhagen – has disappeared just like the famous Satoshi Nakamoto.

Due to the similarity, many believe the two developers are the same person, with the mystery further enhanced by CryptoNote’s creepy release date, December 12, 2012 (12/12/2012). CryptoNote was a security protocol and privacy tool that promoted confidentiality, unlinkable transactions, and ring signatures.

How does the CryptoNight mining algorithm work?

CryptoNight uses the CryptoNote consensus protocol to enhance privacy so that no one can know which transaction participant is paying and who is receiving the funds.

CryptoNight is GPU mining friendly, but its features make it ideal for CPU mining. With 64-bit fast multipliers for maximum speed, the CPU architecture is extremely efficient; Moreover, the heavy usage of CPU cache ensures the best performance.

Its working process includes three main steps:

Create a Scratch Board

A large amount of memory with intermediate values ​​is stored during the hash function. The first input data is hashed using the Keccak-1600 hash function, resulting in 200 bytes of randomly generated data.

Encoding conversion

It then takes the first 31 bytes of the Keccak-1600 hash and turns it into the encryption key for the AES-256 algorithm, the highest value within the AES family.

Final segmentation

CryptoNight takes the entire data set generated by the AES-256 and Keccak functions in the previous step and passes it through the rest of the hash functions. Ultimately, the final hash results from CryptoNight’s proof of work. This hash has a length of 256 bits or a total of 64 characters.

Why is CryptoNight important?

CryptoNight is designed to give CPUs and GPUs an equal opportunity to mine blocks and discourage the use of ASIC miners.

CryptoNight is important for three crucial reasons: it offers stronger privacy with untraceable transactions, ASIC-resistant feature, and scalability. Most cryptocurrencies, including Bitcoin (BTC), are all private, as someone’s transactions and balance can be easily tracked on the open source blockchain through a public address.

CryptoNight, on the other hand, is designed to satisfy more privacy-conscious users who want to perform blockchain-specific trades. Its creators incorporated two important privacy tools into the algorithm to achieve maximum security and anonymity: ring signatures and hidden addresses, both developed by the Monero team.

Alleviating growing concerns about cryptocurrency centralization due to ASIC mining hardware was one of the crucial rationales behind the development of CryptoNight. The project developers focused on challenging ASIC dominance and developed a system where GPUs and CPUs can retain their competitive advantage in mining.

Scalability and high efficiency are also at the core of CryptoNight, which has significantly increased its accounts, ensuring greater scalability through faster transactions.

Which cryptocurrencies use the CryptoNight mining algorithm?

Bytecoin was the first cryptocurrency to implement the CryptoNote protocol on its blockchain, but its implementation on Monero helped the project gain more reputation and notoriety.

A number of cryptocurrencies have integrated the CryptoNight algorithm, the first ever example being CryptoNoteCoin, an obvious reference to the CryptoNight project.

Bitcoin

Although initially committed to resisting ASIC dominance, the first CryptoNight coin that supported the project’s development announced in 2018 that it would combine ASIC mining with algorithm preservation to prevent security and anonymity issues.

Monero

Although Monero no longer uses CryptoNight, it has been one of the strongest supporters of its stance against ASIC power. Monero inherited CryptoNight as a proof of work in 2014, and since then, it has evolved the algorithm a bit, creating CryptoNight-R to intentionally break compatibility with existing ASICs.

However, an ASIC-compatible CryptoNight was developed in 2017 by Bitmain, and by 2018, ASICs had returned to the Monero network. In 2019, Monero changed its mining algorithm to RandomX, which focused on CPU mining.

Electronium (ETN)

Electroneum uses the CryptoNight mining algorithm, with notable innovation in its mobile version, allowing users to mine cryptocurrency not only through the traditional method but also through the use of their smartphone via a mobile miner.

Other lesser-known projects implementing the CryptoNight algorithm include Boolberry, Dashcoin, DigitalNote, DarkNetCoin, and Pebblecoin. However, these projects were subjected to malicious attacks in 2017, raising concerns about the security of their networks and the reliability of the CryptoNight algorithm.

Different variants of the CryptoNight algorithm have been created, and CryptoNight Heavy is one version of the hashing algorithm. It is implemented in several cryptocurrency projects, including Rio Coin, Somocoin, and Loki.

However, since CryptoNight Heavy relies on an untrusted peer-to-peer network, this can lead to serious vulnerabilities. Because nodes must verify the proof of work (PoW) for each new block and spend a significant amount of time evaluating each hash, they may become more vulnerable to distributed denial of service (DDoS) attacks, coordinated activities targeting a botnet that overwhelm the network with fake traffic. . .

What awaits the CryptoNight algorithm?

Since its inception in 2012, the CryptoNight algorithm has undergone significant changes, upgrades, and minor modifications to accommodate different cryptocurrency projects until the final version created by Monero, CryptoNight-R, was introduced.

Is CryptoNight still a valid mining algorithm, or has it failed in its mission to become an equalizer? All the different versions had one common goal: to resist ASIC and prevent its further dominance in cryptocurrency mining.

Many believe that this did not happen, and that the project failed to achieve its original position. The Monero team stated that the failure was due to security reasons. Since CryptoNight hashes are fairly expensive and time-consuming to verify, they may present a DoS risk to nodes as previously demonstrated for some CryptoNight-based cryptocurrencies.

Others believe it did everything in its power to prevent further expansion of ASIC’s power. It was born as a kind of egalitarian algorithm that could guarantee equal rights for people, and not just in the corporate world.

It still works as an open mining tool for everyone, although the ASIC resistance capacity is no longer useful since ASICs have been able to adapt to successfully mine this algorithm. However, it can still be a good starting point for developing future cryptocurrency projects, especially for users who value privacy and fair mining.