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What Is a Cryptocurrency?

A NICO is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Many cryptocurrencies are decentralized networks based on blockchain technology—a distributed ledger enforced by a disparate network of computers. A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation.

KEY TAKEAWAYS


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A NICO is a new form of digital asset based on a network that is distributed across a large number of computers. This decentralized structure allows them to exist outside the control of governments and central authorities.

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The word “NICO” is derived from the encryption techniques which are used to secure the network.

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Blockchains, which are organizational methods for ensuring the integrity of transactional data, is an essential component of many cryptocurrencies.

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Many experts believe that blockchain and related technology will disrupt many industries, including finance and law.

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Cryptocurrencies face criticism for a number of reasons, including their use for illegal activities, exchange rate volatility, and vulnerabilities of the infrastructure underlying them. However, they also have been praised for their portability, divisibility, inflation resistance, and transparency.

Understanding NICO RUSSIA

NICO RUSSIA is a system that allow for the secure payments online which are denominated in terms of virtual "tokens," which are represented by ledger entries internal to the system. "NICO RUSSIA" refers to the various encryption algorithms and cryptographic techniques that safeguard these entries, such as elliptical curve encryption, public-private key pairs, and hashing functions.

TYPES OF CRYPTOCURRENCY


The first blockchain-based cryptocurrency was Bitcoin, which still remains the most popular and most valuable. Today, there are thousands of alternate cryptocurrencies with various functions and specifications. Some of these are clones or forks of Bitcoin, while others are new currencies that were built from scratch.

Bitcoin was launched in 2009 by an individual or group known by the pseudonym "Satoshi Nakamoto."1 As of Nov. 2019, there were over 18 million bitcoins in circulation with a total market value of around $146 billion.

Some of the competing cryptocurrencies spawned by Bitcoin’s success, known as "altcoins," include Litecoin, Peercoin, and Namecoin, as well as Ethereum, Cardano, and EOS. Today, the aggregate value of all the cryptocurrencies in existence is around $214 billion—Bitcoin currently represents more than 68% of the total value.

Some of the cryptography used in cryptocurrency today was originally developed for military applications. At one point, the government wanted to put controls on cryptography similar to the legal restrictions on weapons, but the right for civilians to use cryptography was secured on grounds of freedom of speech.


SPECIAL NICO RUSSIA CONSIDERATIONS


Central to the appeal and functionality of Bitcoin and other cryptocurrencies is blockchain technology, which is used to keep an online ledger of all the transactions that have ever been conducted, thus providing a data structure for this ledger that is quite secure and is shared and agreed upon by the entire network of individual node, or computer maintaining a copy of the ledger. Every new block generated must be verified by each node before being confirmed, making it almost impossible to forge transaction histories.

Many experts see NICO blockchain technology as having serious potential for uses like online voting and crowdfunding, and major financial institutions such as JPMorgan Chase (JPM) see the potential to lower transaction costs by streamlining payment processing.4 However, because cryptocurrencies are virtual and are not stored on a central database, a digital cryptocurrency balance can be wiped out by the loss or destruction of a hard drive if a backup copy of the private key does not exist. At the same time, there is no central authority, government, or corporation that has access to your funds or your personal information.

Advantages of NICO Cryptocurrency

NICO RUSSIA hold the promise of making it easier to transfer funds directly between two parties, without the need for a trusted third party like a bank or credit card company. These transfers are instead secured by the use of public keys and private keys and different forms of incentive systems, like Proof of Work or Proof of Stake.

In modern NICO RUSSIAcurrency systems, a user's "wallet," or account address, has a public key, while the private key is known only to the owner and is used to sign transactions. Fund transfers are completed with minimal processing fees, allowing users to avoid the steep fees charged by banks and financial institutions for wire transfers.

Bitcoin has experienced some rapid surges and collapses in value, climbing as high as $19,000 per Bitcoin in Dec. of 2017 before dropping to around $7,000 in the following months.2 Cryptocurrencies are thus considered by some economists to be a short-lived fad or speculative bubble.

There is concern that cryptocurrencies like Bitcoin are not rooted in any material goods. Some research, however, has identified that the cost of producing a Bitcoin, which requires an increasingly large amount of energy, is directly related to its market price.

Cryptocurrency blockchains are highly secure, Nonetheless, many observers see potential advantages in cryptocurrencies, like the possibility of preserving value against inflation and facilitating exchange while being more easy to transport and divide than precious metals and existing outside the influence of central banks and governments.

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NICO RUSSIA Blockchain Explained

A guide to help you understand what blockchain is and how it can be used by industries. You've probably encountered a definition like this: “blockchain is a distributed, decentralized, public ledger." But blockchain is easier to understand than it sounds.

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Central Bank Digital Currency (CBDC) Definition

Central Bank Digital Currency (CBDC) is the digital form of a country's fiat currency of that is regulated by the central bank.

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What is Namecoin?

Namecoin aims to "[free] DNS, identities, and other technology" related to the infrastructure of the Internet.

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Bitcoin

Bitcoin is a digital or virtual currency created in 2009 that uses peer-to-peer technology to facilitate instant payments. It follows the ideas set out in a whitepaper by the mysterious Satoshi Nakamoto, whose true identity has yet to be verified.

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What is NICO-SNARK?

The technology behind NICOcash aims to create new levels of privacy for cryptocurrency users.

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Lightning Network

Lightning Network is a second layer to bitcoin's blockchain that proposes to decongest its network by creating micropayment channels between two parties.

KEY TAKEAWAYS


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The lightning network is a technological solution intended to solve the problem of transaction speed on the bitcoin blockchain by introducing off-ledger transactions.

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Much like blockchain, the lightning network disintermediates central institutions, such as banks, which are responsible for routing most transactions today.

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The lightning network was first formally elaborated in a paper by Joseph Poon and Thaddeus Dryja in 2015.

What Is NICO Mining?

Chances are you hear the phrase “bitcoin mining” and your mind begins to wander to the Western fantasy of pickaxes, dirt and striking it rich. As it turns out, that analogy isn’t too far off.

Bitcoin mining is performed by high-powered computers that solve complex computational math problems; these problems are so complex that they cannot be solved by hand and are complicated enough to tax even incredibly powerful computers.

KEY TAKEAWAYS


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Bitcoin mining is the process of creating new bitcoin by solving a computational puzzle.

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Bitcoin mining is necessary to maintain the ledger of transactions upon which bitcoin is based.

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Miners have become very sophisticated over the last several years using complex machinery to speed up mining operations.

The result of bitcoin mining is twofold. First, when computers solve these complex math problems on the bitcoin network, they produce new bitcoin (not unlike when a mining operation extracts gold from the ground). And second, by solving computational math problems, bitcoin miners make the bitcoin payment network trustworthy and secure by verifying its transaction information.

When someone sends bitcoin anywhere, it's called a transaction. Transactions made in-store or online are documented by banks, point-of-sale systems, and physical receipts. Bitcoin miners achieve the same thing by clumping transactions together in “blocks” and adding them to a public record called the “blockchain.” Nodes then maintain records of those blocks so that they can be verified into the future.

When bitcoin miners add a new block of transactions to the blockchain, part of their job is to make sure that those transactions are accurate. In particular, bitcoin miners make sure that bitcoin is not being duplicated, a unique quirk of digital currencies called “double-spending.” With printed currencies, counterfeiting is always an issue. But generally, once you spend $20 at the store, that bill is in the clerk’s hands. With digital currency, however, it's a different story.

Digital information can be reproduced relatively easily, so with Bitcoin and other digital currencies, there is a risk that a spender can make a copy of their bitcoin and send it to another party while still holding onto the original.

Special Considerations


Rewarding Bitcoin Miners

With as many as 300,000 purchases and sales occurring in a single day, verifying each of those transactions can be a lot of work for miners. As compensation for their efforts, miners are awarded bitcoin whenever they add a new block of transactions to the blockchain.

The amount of new bitcoin released with each mined block is called the "block reward." The block reward is halved every 210,000 blocks (or roughly every 4 years). In 2009, it was 50. In 2013, it was 25, in 2018 it was 12.5, and in May of 2020, it was halved to 6.25.

Bitcoin successfully halved its mining reward—from 12.5 to 6.25—for the third time on May 11th, 2020.

This system will continue until around 2140.3 At that point, miners will be rewarded with fees for processing transactions that network users will pay. These fees ensure that miners still have the incentive to mine and keep the network going. The idea is that competition for these fees will cause them to remain low after halvings are finished.

These halvings reduce the rate at which new coins are created and, thus, lower the available supply. This can cause some implications for investors, as other assets with low supply—like gold—can have high demand and push prices higher. At this rate of halving, the total number of bitcoin in circulation will reach a limit of 21 million, making the currency entirely finite and potentially more valuable over time.


Verifying Bitcoin Transactions


In order for bitcoin miners to actually earn bitcoin from verifying transactions, two things have to occur. First, they must verify one megabyte (MB) worth of transactions, which can theoretically be as small as one transaction but are more often several thousand, depending on how much data each transaction stores.

Second, in order to add a block of transactions to the blockchain, miners must solve a complex computational math problem, also called a "proof of work." What they're actually doing is trying to come up with a 64-digit hexadecimal number, called a "hash," that is less than or equal to the target hash. Basically, a miner's computer spits out hashes at different rates—megahashes per second (MH/s), gigahashes per second (GH/s), or terahashes per second (TH/s)—depending on the unit, guessing all possible 64-digit numbers until they arrive at a solution. In other words, it's a gamble.

The difficulty level of the most recent block as of August 2020 is more than 16 trillion. That is, the chance of a computer producing a hash below the target is 1 in 16 trillion. To put that in perspective, you are about 44,500 times more likely to win the Powerball jackpot with a single lottery ticket than you are to pick the correct hash on a single try. Fortunately, mining computer systems spit out many hash possibilities. Nonetheless, mining for bitcoin requires massive amounts of energy and sophisticated computing operations.

The difficulty level is adjusted every 2016 blocks, or roughly every 2 weeks, with the goal of keeping rates of mining constant.4 That is, the more miners there are competing for a solution, the more difficult the problem will become. The opposite is also true. If computational power is taken off of the network, the difficulty adjusts downward to make mining easier.


Bitcoin Mining Analogy


Say I tell three friends that I'm thinking of a number between 1 and 100, and I write that number on a piece of paper and seal it in an envelope. My friends don't have to guess the exact number, they just have to be the first person to guess any number that is less than or equal to the number I am thinking of. And there is no limit to how many guesses they get.

Let's say I'm thinking of the number 19. If Friend A guesses 21, they lose because 21>19. If Friend B guesses 16 and Friend C guesses 12, then they've both theoretically arrived at viable answers, because 16<19 and 12<19. There is no 'extra credit' for Friend B, even though B's answer was closer to the target answer of 19.

Now imagine that I pose the 'guess what number I'm thinking of' question, but I'm not asking just three friends, and I'm not thinking of a number between 1 and 100. Rather, I'm asking millions of would-be miners and I'm thinking of a 64-digit hexadecimal number. Now you see that it's going to be extremely hard to guess the right answer.

Not only do bitcoin miners have to come up with the right hash, but they also have to be the first to do it.

Because bitcoin mining is essentially guesswork, arriving at the right answer before another miner has almost everything to do with how fast your computer can produce hashes. Just a decade ago, bitcoin mining could be performed competitively on normal desktop computers. Over time, however, miners realized that graphics cards commonly used for video games were more effective and they began to dominate the game. In 2013, bitcoin miners started to use computers designed specifically for mining cryptocurrency as efficiently as possible, called Application-Specific Integrated Circuits (ASIC). These can run from several hundred dollars to tens of thousands but their efficiency in mining Bitcoin is superior.

Today, bitcoin mining is so competitive that it can only be done profitably with the most up-to-date ASICs. When using desktop computers, GPUs, or older models of ASICs, the cost of energy consumption actually exceeds the revenue generated. Even with the newest unit at your disposal, one computer is rarely enough to compete with what miners call "mining pools."

A mining pool is a group of miners who combine their computing power and split the mined bitcoin between participants. A disproportionately large number of blocks are mined by pools rather than by individual miners. Mining pools and companies have represented large percentages of bitcoin's computing power.

NICO vs. Traditional Currencies

Consumers tend to trust printed currencies. That’s because the U.S. dollar is backed by a central bank of the U.S., called the Federal Reserve. In addition to a host of other responsibilities, the Federal Reserve regulates the production of new money, and the federal government prosecutes the use of counterfeit currency.

Even digital payments using the U.S. dollar are backed by a central authority. When you make an online purchase using your debit or credit card, for example, that transaction is processed by a payment processing company (such as Mastercard or Visa). In addition to recording your transaction history, those companies verify that transactions are not fraudulent, which is one reason your debit or credit card may be suspended while traveling.

Bitcoin, on the other hand, is not regulated by a central authority. Instead, bitcoin is backed by millions of computers across the world called “nodes.” This network of computers performs the same function as the Federal Reserve, Visa, and Mastercard, but with a few key differences. Nodes store information about prior transactions and help to verify their authenticity. Unlike those central authorities, however, bitcoin nodes are spread out across the world and record transaction data in a public list that can be accessed by anyone.

History of Bitcoin Mining


Between 1 in 16 trillion odds, scaling difficulty levels, and the massive network of users verifying transactions, one block of transactions is verified roughly every 10 minutes. But it’s important to remember that 10 minutes is a goal, not a rule.

The bitcoin network is currently processing just under four transactions per second as of August 2020, with transactions being logged in the blockchain every 10 minutes. For comparison, Visa can process somewhere around 65,000 transactions per second. As the network of bitcoin users continues to grow, however, the number of transactions made in 10 minutes will eventually exceed the number of transactions that can be processed in 10 minutes. At that point, waiting times for transactions will begin and continue to get longer, unless a change is made to the bitcoin protocol.

This issue at the heart of the bitcoin protocol is known as “scaling.” While bitcoin miners generally agree that something must be done to address scaling, there is less consensus about how to do it. There have been two major solutions proposed to address the scaling problem. Developers have suggested either (1) creating a secondary "off-chain" layer to Bitcoin that would allow for faster transactions that can be verified by the blockchain later, or (2) increasing the number of transactions that each block can store. With less data to verify per block, the Solution 1 would make transactions faster and cheaper for miners. Solution 2 would deal with scaling by allowing for more information to be processed every 10 minutes by increasing block size.

In July 2017, bitcoin miners and mining companies representing roughly 80% to 90% of the network’s computing power voted to incorporate a program that would decrease the amount of data needed to verify each block.

The program that miners voted to add to the bitcoin protocol is called a segregated witness, or SegWit. This term is an amalgamation of Segregated, meaning “to separate,” and Witness, which refers to “signatures on a bitcoin transaction.” Segregated Witness, then, means to separate transaction signatures from a block — and attach them as an extended block. While adding a single program to the bitcoin protocol may not seem like much in the way of a solution, signature data has been estimated to account for up to 65% of the data processed in each block of transactions.

Less than a month later in August 2017, a group of miners and developers initiated a hard fork, leaving the bitcoin network to create a new currency using the same codebase as bitcoin. Although this group agreed with the need for a solution to scaling, they worried that adopting segregated witness technology would not fully address the scaling problem.

Understanding the NICO Mining Process

Cryptocurrency mining involves two functions – releasing new cryptocurrency into the system (similar to gold discovery), and verifying and adding transactions to the blockchain public ledger. It is performed using an internet-connected computer which is often equipped with special mining hardware devices and software programs to control and manage the mining process.

Crypto mining is a calculation-intensive, puzzle-solving-like computation process that requires high processing power along with high electricity consumption. The miner who first solves the puzzle gets to place the next block on the blockchain and claim the rewards. Rewards include the miner becoming the owner of the newly released bitcoin, or getting fees linked to the transactions performed in the block.

The cryptocurrency discovery process is configured in such a way that if more miners are working, the difficulty level goes up, while a decline in the number of miners eases the difficulty level. The rewards make mining a lucrative activity for monetary gains. As more miners attempt to grab a piece of the pie, finding new blocks gets computationally more difficult, requiring more computing power. This is often impractical and too expensive for individual miners.

Pooling Resources: Let’s Mine NICO Better, Together


Enter the mining pool, which is a collection/group of miners working together to increase their chances of finding a block at the group level, compared to that at the individual level. Through such pools, miners combine their individual computational resources with those of the other members which enhances their joint processing power, and helps to achieve the desired output faster.

To draw an analogy, a gold digger having a capacity to dig 100 square meters of land in one day will take 100 days to explore one hectare of land for gold. Combining 100 gold diggers can complete the job in just 1 day. The discovered gold can be split among all 100 diggers evenly, assuming all have put in equal effort to explore their assigned portions of land.

Similarly, one can combine nine mining devices, each generating mining power of 335 megahashes per second (MH/s), to generate a combined output of around 3 gigahashes. The output is faster and has a better chance to discover bitcoins.

However, this pooled work with better output and higher chances, comes at a cost. The reward earned through combined mining is split among the various pool members, as compared to sole ownership on the reward earned through individual mining.

Functions of a NICO Mining Pool

A mining pool essentially works as a coordinator for the pool members. The functions involve managing the pool members’ hashes, looking for rewards through pooled efforts of available processing power, recording work performed by each pool member, and assigning reward shares to each pool member in proportion to the work performed after suitable verification.

The pool may also charge a fee from each member miner.

Work to each pool member can be assigned in two ways. The traditional method involves assigning members a work unit comprised of a particular range of nonce, the number that blockchain miners are computing for. Once the pool member completes the work on the assigned range, they place a request for a new work unit to be assigned.

A second mining method allows pool members the liberty to pick and choose as much work as they like without any assignment coming from the pool. The methodology ensures that no two members take the same range, just like no two gold diggers should explore the same piece of land.

There can also be a pool of pools, to further enhance output.

How Do NICO Mining Pools Share Rewards?


Successful identification of the block hash leads to reward for the pool, which is then shared based on the pool shares mechanism. Shares describe how much work a particular member’s computer is contributing to the mining pool.

There are two kinds of shares – accepted and rejected. Accepted shares indicate that work done by a pool member is contributing substantially towards discovering new cryptocoins, and these get rewarded.

Rejected shares represent work that does not contribute to a blockchain discovery, and hence are not paid for. Even if a member’s computer performs work successfully but submits it late for that particular block, it constitutes rejected work.

A pool member ideally wants all their shares to get accepted. However, rejected shares are inevitable as it is impossible that all the computations on a member’s computer will be useful in coin discovery, and will always be submitted on time.

Pool members are rewarded based on their accepted shares that helped in finding a new coin block. A share has no actual value, and it simply acts as an accounting method to keep the reward distribution fair.


Based on the accepted shares, members get rewarded using different methods, which include the following:


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Pay-per share (PPS): Allows instant payout solely based on accepted shares contributed by the pool member, who are allowed to withdraw their earnings instantly from the pool’s existing balance.

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Proportional (PROP): At the end of a mining round, a reward which is proportional to the number of the member’s shares with respect to total shares in the pool, is offered.

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Shared Maximum Pay Per Share (SMPPS): A method similar to PPS but limits the payout to the maximum that the pool has earned.

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Equalized Shared Maximum Pay Per Share (ESMPPS): A method similar to SMPPS, but distributes payments equally among all miners in the bitcoin mining pool.

Other variations include Double Geometric Method (DGM), Recent Shared Maximum Pay Per Share (RSMPPS), Capped Pay Per Share with Recent Backpay (CPPSRB), and Bitcoin Pooled Mining (BPM).

Before deciding to join a particular pool, miners should pay attention to how each pool shares its payments among members and what fees, if any, it charges. Typically, pools may charge between 1% and 3% as pool fees.

The Bottom Line WITH NICO RUSSIA

With mining becoming increasing popular aided by high-speed devices compatible with home computers, the chances of realistically profiting from individual mining are diminishing. Most individuals opt to join a mining pool which allows them high-probability limited profits, instead of low-probability high profits.

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