Bitcoin and Cryptocurrency Technologies

Figure 8.5: The cycle of Bitcoin mining
Once mining hardware becomes a commodity and electricity is a commodity (as it generally already
is), no miner would have a significant advantage over any other miner in terms of how efficiently they
could convert their initial cryptocurrency holdings into mining rewards. Barring minor variations in
efficiency, whoever invests the most into mining will receive the most rewards.
The basic question motivating virtual mining is: what would happen if we removed the step of
spending money on power and equipment? After all, this process is primarily used to prove who has
invested the most in mining. Why not simply allocate mining “power” directly to all currency holders
in proportion to how much currency they actually hold?
Recall that the original goal of Bitcoin mining was to enable a form of voting on the state of the block
chain, with miners with more computing power gaining more votes. We could instead design our
“voting” system so that votes are determined by how much currency one currently holds.
Advantages of virtual mining. ​The primary advantage of this approach is obvious: it removes the
wasteful right half of the mining cycle from Figure 8.5, leaving us with a “closed” system as shown in
Figure 8.6.
Figure 8.6: The virtual mining cycle
In addition to simplicity, this approach would dramatically reduce Bitcoin’s environmental footprint. It
wouldn’t reduce energy consumption to zero, because miners will always have to expend some
computational resources to communicate with the network and validate. Some virtual mining
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