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

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

Imagine our block consists of the word BUTTERFLY discussed earlier. In reality, the cube 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 starts with a certain number of zeros, then the cube is considered verified.

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For our example, lets say that we've a mining problem of simply two, ie, our HASH should begin with two zeros. .

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The difficulty: BUTTERFLY will return the same HASH, and it doesnt begin with two zeros. So 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 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 forecast 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 tries:

This arduous process 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 normal home computer working alone, ie, not an application-specific integrated circuit (ASIC) and not a part of a cloud mining network, would require 2.7 million years to mine one block. .

This has caused the growth of ASIC computers built particularly for mining my company and also 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 great deal 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 strategy was soon replaced by GPU mining.

GPU mining. An graphics processing unit (GPU) is a powerful processor whose sole objective is to assist your computers graphics card in rendering 3D graphics. GPUs are not constructed for executive decisions (like CPUs) however to be very good 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 greatly outperformed GPUs and CPUs in the mining process as FPGAs are processors which 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 are 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 solves a block, the reward is shared with everyone in the swimming pool in a ratio representative of just how much site web work you put into the pool (even though you personally never solved the puzzle). .

Cloud mining. Clouds provide prospective miners the capability to purchase mining channels 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 decide to hang your digital pickaxe.

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

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Desktop wallets. Software like Bitcoin Core allows you to send and save 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 retrieved from anywhere.

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

Paper wallets. Some websites offer paper wallet services, generating a Full Article piece of paper with two QR codes on it. One code is your public address where you get bitcoin and the other is your personal address you can use for spending.