Monero Mining and Consensus Mechanism

Monero Mining & Consensus Mechanism

Monero is based on the CryptoNight hash algorithm, which is a Proof-of Work (PoW) consensus mechanism based on the CryptoNote protocol. CryptoNote is an application layer protocol that aims to be an evolution of the fundamental ideas behind Bitcoin, as it focuses more on anonymity. The CryptoNote codebase is not forked from Bitcoin, so it has different inner algorithms that are used to recalculate new difficulty levels or new block sizes for example. Blocks on the Monero blockchain are mined in two minute intervals, which is a lot quicker than the current 10 minute block interval used by Bitcoin.

CryptoNight relies on ring signatures to provide a certain degree of privacy when making transactions.Unlike other blockchains, CryptoNote transactions cannot be followed through the blockchain by anyone other than the sender and receiver in any way that reveals who sent or received the coins, due to the use of ring signatures.

The XMR hash algorithm is memory intensive and since 2014 was most efficiently mined using CPUs. The fact that you can mine Monero using ordinary consumer hardware makes it a lot easier for anyone to get involved in mining. This benefits the casual miner as it reduces the payoff from using specialized hardware, making GPUs less effective from a cost/reward perspective. That being said, if you already have GPUs, Monero is one of the few currencies that can be mined by both CPUs and GPUs (most algorithms are built for only one or the other), thus making mining rigs that are already set up more profitable.

According to MinerGate, until recently, the CryptoNight algorithm was ASIC-resistant and could not be mined using Application Specific Integrated Circuits (ASICs) but only mined using CPUs and GPUs. As of 2018, there are now at least 3 ASIC miners with very high hash rates that can be used to mine Monero.

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