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

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

Imagine our block consists of the word BUTTERFLY discussed earlier. 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 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 instance, lets say that we've a mining difficulty of simply two, ie, our HASH must start with two zeros. .

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The difficulty: BUTTERFLY will always return the exact same HASH, and it doesnt start with two zeros. Thus what we need is your next variable, a random number (known as a NONCE). We take this number, combine it with BUTTERFLY, and HASH again. If it doesnt begin with two zeros, we change the number and try again, and since changing one small number changes the entire HASH result, there's absolutely no method to predict 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 attempts:

This arduous procedure of randomly trying to find a number that supplies the solution is what creates bitcoin mining such a computationally expensive process, and as more miners join the network, the tougher it gets. As of November 2017, a regular 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 into mine one block. .

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

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

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GPU mining. A graphics processing read review unit (GPU) is a potent processor whose sole objective is to help your own computers graphics card in rendering 3D graphics. GPUs are not built for executive decisions (like CPUs) however to be somewhat 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 using field-programmable gate arrays (FPGAs). These greatly outperformed GPUs and CPUs in the mining process as article FPGAs are chips that can be programmed to perform specific instructions and only those instructions (instead of being repurposed for mining, like GPUs were).

ASIC mining. Similar to FPGAs, application-specific integrated circuits are processors designed for a particular purpose, in our situation 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 cancel the problem of mining a block, miners started organising in pools or cloud mining networks. Whenever a miner in one of those pools simplifies a cube, the reward is shared with everyone in the pool in a ratio representative of how much work you put into the pool (even though you personally never solved the mystery ). .

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 energy costs, no extra heat and nothing to sell when you opt to hang up your virtual pickaxe.

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

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Desktop wallets. Software like Bitcoin Core lets you send and save bitcoin addresses and also 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 accessed from anywhere.

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

Paper wallets. Some sites offer paper wallet solutions, generating a bit of paper using two QR codes on it. One code is the public address at which you get bitcoin and the other is the personal address you can use for spending.

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