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For instance, the SHA-256 of the word BUTTERFLY (source) is 8c62ace4f9ef8ccd08ca6fb992a8524bb7dbdc0530654bd254c9da07a660949a (HASH). This seemingly random string of letters and numbers has three important properties:

Bitcoin mining involves three factors: the block, the mining issue and a random number. Heres how it all comes together:

Imagine our cube consists of the word BUTTERFLY discussed previously. In fact, the cube would contain a list of recent, unverified transactions, but lets keep it simple. In order for the block to be solved, bitcoin uses a deceptively simple test: If the HASH result of the block begins with a certain number of zeros, the block is considered verified.

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For our example, lets say that we've a mining problem of just two, ie, our HASH must begin with two zeros. .

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The problem: BUTTERFLY will return the exact same HASH, and it doesnt start with two zeros. So what we need is the next variable, a random number (known as a NONCE). We take this number, combine it with BUTTERFLY, and HASH again. If it doesnt start with two zeros, we change the number and try again, and because changing one small number changes the entire HASH outcome, there's absolutely no method to forecast the number well need to solve this! .

We repeat this procedure over and over until we find a number that, when combined with BUTTERFLY, provides us a HASH that starts with two zeros. That number is the solution to the block. Here are some tries:

This arduous procedure of randomly trying to find a number that gives the solution is what makes bitcoin mining such a computationally expensive process, and as more miners join the network, the harder it gets. As of November 2017, a normal home computer working alone, ie, not an application-specific integrated circuit (ASIC) and not part of a cloud mining network, would require 2.7 million years to mine one block. .

This has led to the growth of ASIC computers built specifically for mining and to an increase in cloud mining.

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CPU mining. In the first days of bitcoin, mining difficulty was reduced and not a lot of miners were competing for blocks and rewards. This made it worthwhile to use your computers own central processing unit (CPU) to mine bitcoin. However, that approach was soon replaced by GPU mining.

GPU mining. A graphics processing unit (GPU) is a potent processor whose sole objective is to assist your own computers graphics card in visit our website rendering 3D graphics. GPUs are not constructed for executive decisions (like CPUs) however to be very good labourers, hence GPUs can execute over 800 times more instructions in precisely the exact same amount of time as a CPU.

FPGA mining. Next came mining with field-programmable gate arrays (FPGAs). These greatly outperformed GPUs and CPUs in the mining procedure as FPGAs are chips that can be programmed to perform certain instructions and only those instructions (instead of being repurposed for mining, such as GPUs were).

ASIC mining. Comparable to FPGAs, application-specific integrated circuits are processors designed for a specific purpose, in our situation mining bitcoin, and nothing else. ASICs for bitcoin were introduced in 2013 and, as of November 2017, they are the best processors out there for mining bitcoin and they outperform FPGAs in power consumption. .

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Mining pools. To offset the difficulty of mining a block, miners started organising in cloud or pools mining networks. Whenever a miner in one of these pools solves a block, the reward is shared with everyone in the swimming pool in a ratio representative of just how much work you put into the pool (even though you personally never solved the puzzle). .

Cloud mining. Clouds offer potential miners the ability to buy mining rigs in a remote data centre location. There are many obvious advantages, the most obvious beingno electricity costs, no extra heat and nothing to market when you opt to hang up your virtual pickaxe.

Once miners get bitcoin, they are given a virtual key to the bitcoin addresses. You can use this digital key to gain access and validate or approve transactions.

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Desktop pockets. Software like Bitcoin Core lets you send and store bitcoin addresses and also connects to the network to track transactions.

Online wallets. Bitcoin keys are saved online by exchange programs see post such as Coinbase or Circle and can be retrieved from anywhere.

Mobile wallets. Apps like Blockchain shop and encrypt your own bitcoin keys so you can make payments using your mobile device.

Paper wallets. Some websites offer paper wallet services, generating a bit of paper with two QR codes on it. One code is the public address where you get bitcoin and the other is about his your personal address you can use for spending.