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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 contains three important properties:

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

Imagine our block consists of the word BUTTERFLY discussed previously. In fact, the block would contain a list of recent, unverified transactions, but lets keep it simple. In order for the block to be solved, bitcoin uses a simple test: If the HASH consequence 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 difficulty: BUTTERFLY will return the same HASH, and it doesnt begin with two zeros. So what we need is the next variable, a random number (known as a NONCE). We carry this number, combine it with BUTTERFLY, and HASH again. If it doesnt start with two zeros, we change the number and try again, and since changing one little number changes the entire HASH result, there is no way to forecast the number well need to solve this! .

We repeat this process over and over until we find a number that, when combined with BUTTERFLY, gives us a HASH that begins 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 creates bitcoin mining such a computationally expensive process, and as more miners join the network, the tougher it gets. At November 2017, a normal home computer working alone, ie, not an application-specific integrated circuit (ASIC) and not part of a cloud mining network, could take 2.7 million years to mine one block. .

This has led to the rise of ASIC computers constructed particularly for mining and also to an increase in cloud mining.

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

GPU mining. A graphics processing unit (GPU) is a powerful processor whose sole purpose is to help your own computers graphics card in rendering 3D graphics. GPUs are not built for executive decisions (like CPUs) but to be very good labourers, hence GPUs are able to execute over 800 times more instructions in the 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 process as FPGAs are chips which can be programmed to perform specific instructions and only browse around these guys those instructions (instead of being repurposed for mining, like GPUs were).

ASIC mining. Similar to FPGAs, application-specific integrated circuits are chips designed for a particular function, 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 electricity 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 how much work you put into the swimming pool (even though you personally never solved the mystery ). .

Cloud mining. Clouds provide potential miners the ability to purchase mining channels in a remote data centre location. There are many obvious advantages, the most obvious being: no energy costs, no extra heat and nothing to market when you decide to hang your digital pickaxe.

Once miners receive bitcoin, they are given a digital key to the bitcoin addresses. You can use this digital key to access and confirm or approve transactions.

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

Online wallets. Bitcoin keys are saved online by exchange platforms such as Coinbase or Circle and can be accessed from anywhere.

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

Paper wallets. Some sites offer paper wallet services, generating a piece of paper using just two QR codes on it. One code is your public address at which you receive bitcoin and the other is your private address you can use for spending.