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For instance, the SHA-256 of the term 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 cube would contain a list of recent, unverified transactions, but lets keep it simple. In order for the block to be solved, bitcoin utilizes a simple test: If the HASH result of the block starts with a certain number of zeros, the block is considered verified.

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For instance, lets say that we have a mining problem of just two, ie, our HASH must start with two zeros. .

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The problem: BUTTERFLY will return the same HASH, and it doesnt start with two zeros. So what we need is your third variable, 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 is no way 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 the solution to the block. Here are some attempts:

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. At 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 require 2.7 million years into mine one block. .

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

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CPU mining. In the early days of bitcoin, mining difficulty was reduced and not a great deal of miners were competing for cubes 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.

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GPU mining. A graphics processing unit (GPU) is a potent processor whose sole purpose is to assist your own computers graphics card in rendering 3D graphics. GPUs are not built for executive decisions (like CPUs) but to be somewhat good 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 right here the mining process as FPGAs are chips that can be programmed to perform specific instructions and only those instructions (instead of being repurposed for mining, such as 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're the best processors available for mining bitcoin and they outperform FPGAs in power 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 simplifies a cube, the reward is shared with everyone in the 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 offer prospective miners the ability to buy mining rigs in a remote data centre location. There are many obvious advantages, the most obvious beingno energy expenses, no excess heat and nothing to sell when you decide to hang up your virtual pickaxe.

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

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Desktop pockets. Software like Bitcoin Core lets you send and store bitcoin addresses and connects to the network to monitor 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 shop and encrypt your bitcoin keys so that you can make payments using your mobile device.

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

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