A Gamer's Guide to Blockchain and Crypto

Keith

February 11, 2019

Now that you know what your computer is really worth, let's learn how Salad taps into your PC's idle computing power. In this guide we'll shed light on modern cryptocurrencies, Blockchain, and the Ethereum network, the technology that helps Salad pile on the cheddar.

How Crypto Happened

Between the NFT art revolution and the rise of blockchain games, it seems everyone's gone bananas over crypto. The best way to get your head around the craze is to bone up on the history behind Bitcoin and Ethereum, the prominent step-siblings that led the charge.

Birth of Bitcoin

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The story begins in 2008, when an anonymous developer going only by Satoshi Nakamoto released the Bitcoin white paper. In its brief nine pages, Satoshi detailed the mechanics of a true digital currency—something native to the internet and powered by peer-to-peer transactions.

Whereas traditional **currency is secured by an institution like a national bank, these transactions would be secured in a distributed manner by fellow network participants. The white paper laid the groundwork for the minting of 21 million highly divisible coins through the competitive algorithm race we now know as "cryptomining."

To this day we don’t know who Satoshi is, but we’re pretty sure it’s not this guy.

Deus Ex Decentralization

Distributing the ability to confirm transactions and mint currency is part of what's known as "decentralization." It's the act of removing unnecessary impediments (like banks) and arbiters (like governments) from human exchanges. And it's important!

Satoshi put the problem of decentralization in a nutshell:

Commerce on the Internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments.

All digital financial transactions require a third party to mediate disputes, issue refunds, and otherwise secure payments. This adds complexity, turnaround time, and fees—not to mention an undue burden on personal freedoms. Crypto proponents believe people have an implicit right to conduct commerce. To them, faith in old school institutions is a shakier foundation than a community of individuals under a common standard. Satoshi's “cryptographic proof” system captured that ideal.

A Crypto Cash-in

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After the Bitcoin white paper got around, engineers and other pioneers joined in, cloning the software onto their own machines and contributing work to the fledgling Bitcoin network. Despite their faith, no one used Bitcoin to pay for something real for nearly two years.

In 2010, the first (and now famous) real-world Bitcoin transaction took place. A man named Lazlo offered to pay 10,000 BTC for two pizzas in a Bitcoin Talk forum post—which is like dropping $275M per pie, by today's standards. Talk about putting your money where your mouth is.

For Bitcoin's viability as currency, the proof was in the pizza. Soon after Lazlo ponied up the dough, Bitcoin's community of early adopters grew exponentially, effectively birthing a new monetary system.

What's It Really Worth?

Since cryptocurrencies aren't regulated by a central government, investors can drive the price to volatile heights. Why are people so willing to fork over cash for internet Monopoly money? When people see a haywire market, it's easy to conclude crypto's a bubble waiting to burst.

No disrespect to George Washington, but why is the dollar worth anything? Its value is derived from the trust people have in Uncle Sam (or whichever lunatic is wearing his hat at the moment). Since most of the world's money is no longer backed by a commodity like gold, paper "bills" are just written promises that your government will keep on kicking.

This so-called [fiat currency](https://www.investopedia.com/terms/f/fiatmoney.asp) (Latin for "by decree") derives its value from its legally protected status. It requires a central issuer who can arbitrarily determine everything from how you can use it to what it's worth. And it's subject to devaluation any time a government lets the money printer go "brrrrr."

Digital Dinero

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Bitcoin wasn't the first digital currency, but it did enough things differently to survive. Most notably, Satoshi's architecture managed to solve something known as "the double spending problem" without relying on a central bank.

Like the ol' "coin-on-a-string" trick, "double spending" is what happens when you try to reuse the same money to cheat the system. It's a deficiency endemic to the digital dimension; if your money is just ones and zeroes, it's easy to copy your coins and tack a few zeroes on the end.

Bitcoin figured out how to circumvent this using a modified proof of work model (more on that below). Thanks to this, each block represents an investment of processing power, work, and time—which are much more tangible resources than a smidge of patriotic fervor.

Is Crypto Legal?

Cryptocurrencies have been erroneously associated with the dark web, but they're actually worse than dollars when it comes to purchasing illegal goods, because every blockchain transaction is public. A lot of fools learned that the hard way.

The stated purpose of cryptocurrency is free, peer-to-peer exchange. While it's been misused before, people are wising up to the need for a more resistant digital currency. Most cryptocurrency protocols offer features to guarantee utility, security, and privacy.

Enter Ethereum

For details on Ethereum's key features, check out our Ethereum guide.

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By 2013, Bitcoin’s uses had expanded beyond pizza delivery to copping Lamborghinis. While working as a writer at Bitcoin Magazine, a young software developer named Vitalik Buterin published his own white paper detailing a plan to modify Bitcoin's code. He envisioned a way to enhance Bitcoin's functionality and turn it into a platform for distributed web applications.

By building a scripting language on top of Bitcoin, he believed it would be possible to execute programs using automated rules known as "smart contracts." Buterin foresaw an ecosystem of decentralized apps that ran and handled real value without oversight. But the Bitcoin community was reluctant to change, and his ideas failed to find traction.

Yet all was not lost. Buterin went on to realize that vision by co-founding a project called Ethereum. It's since become a vibrant decentralized ecosystem of subsidiary coins, NFT art, and software, whose underlying currency is second only to Bitcoin in terms of value.

How Does Blockchain Work?

A blockchain is an endless list of verified transactions (a "ledger," if you're an old-time cowboy). It contains a record of every coin that's been issued and all the ways those coins have been used. Every block is essentially a chunk of data containing info on a few thousand transactions.

Early Bitcoiners started from scratch, adding new entries to that ledger until it became the behemoth it is today.

Hashing

When a transaction is sent, its metadata—info about the sender, recipient, amount, and timestamp—gets encoded with a cryptographic algorithm. With Bitcoin's SHA-256 algorithm, the resulting hash is a unique, 64-digit jumble of hexadecimal letters and numbers.

Hashing puts the "crypto" in "cryptocurrency." It's sort of like using a secret decoder ring, except that any text you enter produces a totally unique hash. Change one little character, and you would get something completely different! Blockchain protocols use hashing functions in tons of different ways.

Proof of Work

Any transaction on the Bitcoin network must be confirmed by someone else. This peer review ensures that the money changing hands is real and traceable, and it's part of a consensus system known as proof of work.

With a proof of work (PoW) currency, transactions are not immediately added to a block. They're stored separately, oftentimes in a more localized subset of the network—at this stage, only a few computers know about the stuff you're buying online. If other people put in the work to prove your transaction is real, it will get sorted into a block and added to the public blockchain.

What Exactly Is Cryptomining?

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Every cryptocurrency has its own mechanism for issuing coins and confirming the validity of transactions. With Bitcoin, the network generates a set of complex cryptographic puzzles that require a particular hash to solve. Network participants known as miners use their GPUs (and sometimes CPUs) to randomly suggest solutions to those equations. It's a lottery combined with a high-speed race.

Block Rewards

It wouldn't be mining without treasure. PoW currencies incentivize their miners to confirm transactions by offering block rewards. If a miner can "win the block" before someone else, they'll walk away with some of whatever currency is native to the network. This is how new Bitcoin gets minted.

Validation

Finding the answer is only the first step. When a miner's hardware produces a hash that solves the equation, their software gets the chance to arrange some pending transactions into a block. That proposed block is broadcast to everyone else running the Bitcoin program—along with the solution that got them there.

The rest of the computers hooked up to the network must validate any proposed solution that comes their way. If the answer checks out, the miner who found it hits paydirt, and the block is officially logged to the blockchain.

Difficulty

There is a limited set of valid answers for every blockchain computation, and most protocols are designed to narrow that window over time. Network difficulty is a measure of how unlikely it is to find a solution. It changes based on how many miners there are, the quality of their hardware, and the length of the blockchain.

Hashrate

The number of possible solutions a computer (or a distributed network like Salad) can output in a given timeframe is called hashrate (or "hash power"). A network's hashrate varies based on the connected hardware and how many friends you bring to the block party.

Building the Blockchain

Every new block incorporates the timestamp of its creation and information about all the blocks that preceded it—meaning only valid, true transactions can take place. This forms the basis of a never-ending digital ledger that can be trusted as accurate.

In theory, malicious actors would have to control more than half (51%, to be exact) of the network's machines to commit a false transaction to the blockchain. And they'd have to solve every block that's ever existed first just to get their shot.

At the rate it’s going, Bitcoin could never be shut down. It lives on millions of servers around the world, validating new transactions and issuing new coins.

Using Cryptocurrency

Salad mercifully spares you the dry reading that goes into using crypto. For the interested, here's a quick run-down on some of the terms you'll need to know before getting your feet wet.

Wallets

To use cryptocurrencies on your own, you'll need to set up a wallet. Wallets usually come in the form of a digital database (like those offered by Metamask) or an offline hard drive known as a "cold wallet." Some coiners prefer the lo-fi route and scribble down their secret codes on paper.

Private Keys

Every Bitcoin wallet has a randomly-generated ID called a private key. This super secret string of numbers and letters is what makes Bitcoin so secure—provided you don't leave it around for your mom to find.

Public Keys

Private keys are correlated to a hashed version of themselves known as public keys. Together they form a "key-pair," which is a computing term for related data that get stored together.

Addresses

Most wallets apply their security algorithms to hash your public key into an address, thereby anonymizing your identity. If you want to send crypto to someone's wallet, you'll need to know the recipient's address. You can even create unique addresses for every transaction—in fact, this is what happens when you keep your coins on a marketplace exchange.

When a transaction gets sent to your wallet, its information gets encrypted with your public key. To claim the crypto, you'll have to input your private key to prove you are who you say you are.

How Does Salad Fit in?

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Over the years, crypto's rise to power has had some unintended consequences for gamers. Since GPUs excel at crunching mondo numbers simultaneously, homebrew miners have started buying up powerful cards. The price of graphics cards has skyrocketed since the 2017 gold rush—putting PC gamers forever at odds with the burgeoning Bitcoin.

Salad was built by gamers; we’ve even stuffed our own rigs with high-end graphics cards and thread-ripping CPUs. But outside of our gaming hours, all that potent computing power sits idle while we snooze or toil at the office.

We wanted to restore dormant value to the peeps who invest so much time and energy into their passion, and help to reconcile the worlds of gaming and cryptocurrency. Ethereum offered Salad a way to reward gamers for their contributions and profit from their mighty PCs.

The Basics of ASICs

Application-specific integrated circuits (or "ASICs") are specialized machines dedicated to mining a single cryptocurrency. Most consumer hardware can’t hope to compete with these Bitcoin printing presses—meaning Bitcoin mining is no longer a profitable proposition for solo miners. And it probably never will be again.

Yet miners might find a windfall during the next alt season. The additional functionality most altcoins offer makes it tougher to rig an ASIC to mine them. Home PCs still have a dog in the fight—and our distributed Kitchen has your back.

Salad is tailor-made to mine a number of different cryptocurrencies. Every time you Chop, we find the most profitable place to point your rig at, based on your specs and current network difficulties across our supported coins.

The Road Ahead

We're stoked to support an emergent technology like Ethereum! Our Salad Chefs are building pillar platforms for the future of the web, one Chop at a time. Whether your rig mines Ethereum today or trains tomorrow's AIs, Salad will always keep the Kitchen cooking for our fellow gamers, help you profit from your PC, and offer the latest and greatest in epic loot.