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

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

Imagine our cube consists of the term BUTTERFLY discussed previously. In reality, the block could contain a listing 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 cube is considered confirmed.

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

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The problem: BUTTERFLY will always return the same HASH, and it doesnt begin with two zeros. So what we need is the third factor, a random number (called 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 little number changes the whole HASH result, there's absolutely no method to predict 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 starts with two zeros. That number is your solution to the block. Here are some tries:

This arduous procedure of randomly trying to find a number that supplies the solution is the thing that creates bitcoin mining such a computationally expensive procedure, 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 a part of a cloud mining network, could take 2.7 million years to mine one block. .

This has caused the rise of ASIC computers built 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 rewarding to use your computers own central processing unit (CPU) to mine bitcoin. However, that approach was soon replaced by GPU mining.

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

FPGA mining. Next came mining using field-programmable gate arrays (FPGAs). These significantly outperformed GPUs and CPUs in the mining process as FPGAs are processors that can be programmed to execute specific 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 particular purpose, in our case mining bitcoin, and nothing else. ASICs for bitcoin were introduced in 2013 and, as of November 2017, they're the best processors available for mining bitcoin and they outperform FPGAs in electricity consumption. .

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Mining pools. To offset the problem 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 payoff is shared with everyone in the pool in a ratio representative of just how much work you put into the swimming pool (even though you personally never solved the puzzle). .

Cloud mining. Click Here Clouds offer potential miners the ability to buy mining rigs in a remote data centre location. There are many obvious advantages, the most obvious being: no electricity costs, no excess heat and nothing to sell 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 electronic key to gain access and validate or approve transactions.

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Desktop pockets. Software such as Bitcoin Core allows you to send and save bitcoin addresses and connects to the network to track transactions.

Online wallets. Bitcoin keys are saved online by exchange programs such as Coinbase or Circle and can be retrieved 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 websites offer paper wallet services, generating a piece of paper using two QR codes on it. One code is the public address where you receive bitcoin and the other is your private address you can use for spending.