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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 block, the mining issue and a random number. Heres how it all comes together:

Imagine our block consists of the term BUTTERFLY discussed earlier. In fact, the block would 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 consequence of the block starts with a certain number of zeros, then the block is considered confirmed.

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

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The problem: BUTTERFLY will always return the exact same HASH, and it doesnt start with two zeros. So what we need is your next factor, 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 because changing one little number changes the whole HASH outcome, there is no method to predict the number well need to address this! .

We repeat this process 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 makes 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, would 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 first days of bitcoin, mining difficulty was reduced and not a great deal of miners were competing for cubes 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.

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GPU mining. A graphics processing unit (GPU) is a potent processor whose sole objective is to assist your computers graphics card in rendering 3D graphics. GPUs are not constructed for executive decisions (like CPUs) but to be somewhat great labourers, hence GPUs can 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 significantly outperformed GPUs and CPUs in the mining procedure as FPGAs are processors that can be programmed to execute certain instructions and read only 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're the best processors available for mining bitcoin and they outperform FPGAs in power consumption. .

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Mining pools. To offset the difficulty of mining a block, miners started organising in pools or cloud 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 just how much work you put into the swimming pool (even though you personally never solved the mystery ). .

Cloud mining. Clouds provide potential miners the capability to buy mining channels in a remote data centre location. There are many obvious advantages, the most obvious being: no energy costs, no excess heat and nothing to sell when you decide to hang up 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 such as Bitcoin Core lets you send and save bitcoin addresses and also connects to the network to track transactions.

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

Mobile wallets. Programs like Blockchain shop and encrypt your own bitcoin keys so you can make payments using your cellular device.

Paper wallets. Some sites provide paper wallet services, generating a piece of paper with 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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