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For instance, 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 difficulty and a random number. Heres how it all comes together:

Imagine our block consists of the word BUTTERFLY discussed earlier. In fact, the cube could 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, then the block is considered verified.

 

 

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For instance, lets say that we've 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 same HASH, and it doesnt begin with two zeros. Thus what we need is the next 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 result, there's absolutely no method to forecast the number well need to address 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 your solution to the block. Here are some attempts:

This arduous process of randomly trying to find a number that supplies 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, would take 2.7 million years into mine one block. .

 

 

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

 

 

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CPU mining. In the first days of bitcoin, mining issue was reduced and not a lot of miners were competing 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 powerful processor whose sole purpose is to assist your computers graphics card in rendering 3D graphics. GPUs are not constructed for executive decisions (such as CPUs) however to be very good labourers, hence GPUs are able to execute over 800 times more instructions in precisely the exact same amount of time as a CPU.

FPGA mining. Next came mining with field-programmable gate arrays (FPGAs). These significantly outperformed GPUs and CPUs in the mining process as FPGAs are processors 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 specific purpose, 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 out there 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 find out you personally never solved the mystery ). .

Cloud mining. Clouds offer prospective miners the ability to buy mining channels 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 up your virtual pickaxe.

Once miners get 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 store bitcoin addresses and connects to the network to track 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 store and encrypt your own bitcoin keys so that you can make payments using your cellular device.

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

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