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For instance, the SHA-256 of the word BUTTERFLY (origin ) is 8c62ace4f9ef8ccd08ca6fb992a8524bb7dbdc0530654bd254c9da07a660949a (HASH). This seemingly random string of letters and numbers has 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 block consists of the term BUTTERFLY discussed earlier. 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 utilizes a deceptively simple test: If the HASH result of the block starts with a certain number of zeros, then the block is considered verified.

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

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The problem: BUTTERFLY will always return the exact same HASH, and it doesnt begin with two zeros. So what we need is the 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 small number changes the entire HASH outcome, there's absolutely no method to forecast the number well need to address this! .

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

This arduous procedure of randomly trying to find a number that gives the solution is the thing that creates bitcoin mining such a computationally expensive procedure, 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 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 particularly for mining and to an increase in cloud mining.

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

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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) but to be very great 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 procedure as FPGAs are chips which can be programmed to execute 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 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 pools or cloud mining networks. Whenever a miner in one of these pools solves a block, the reward 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. Clouds offer prospective miners the capability to buy mining rigs in a remote data centre location. There are many obvious advantages, the most obvious being: no electricity costs, no extra heat and nothing to market when you opt to hang your digital pickaxe.

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

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

Online wallets. Bitcoin keys are stored online by exchange programs like Coinbase or Circle and can be retrieved from anywhere.

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

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

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