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For example, the SHA-256 of this word 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 utilizes a deceptively simple test: If the HASH result of the block starts with a certain number of zeros, then the cube is considered confirmed.

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For instance, lets say that we've a mining difficulty of simply two, ie, our HASH should start with two zeros. .

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The problem: BUTTERFLY will always return the same HASH, and it doesnt start with two zeros. So what we need is the next factor, 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 small number changes the whole HASH result, there is no way 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, gives us a HASH that begins 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 gives the solution is what makes bitcoin mining such a computationally expensive process, and as more miners join the network, the harder 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, could require 2.7 million years into mine one block. .

This has caused the rise of ASIC computers built particularly for mining 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 worthwhile to utilize 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 potent processor whose sole objective is to help your own 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 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 process as FPGAs are processors which can be programmed to perform 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 chips designed for a specific 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 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 payoff 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 puzzle). .

Cloud mining. Clouds offer potential miners the ability to purchase mining rigs in a remote data centre location. There are many obvious advantages, the most obvious beingno electricity expenses, no extra heat and nothing to sell when you decide to hang up 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 wallets. Software such as Bitcoin Core allows you to send and save bitcoin addresses look what i found and also 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. Programs like Blockchain store and encrypt your own bitcoin keys so that you can make payments using your cellular device.

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