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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 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 previously. 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 simple test: If the HASH result of the block starts with a certain number of zeros, the block is considered confirmed.
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For instance, lets say that we have a mining problem of just 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 the 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 since changing one small number changes the entire HASH result, there's absolutely 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 starts with two zeros. That number is your solution to the block. Here are some tries:
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. At 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 require 2.7 million years to mine one More Info block. .
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CPU mining. In the early days of bitcoin, mining difficulty was low and not a lot of miners were competing for blocks and rewards. This made it worthwhile to use your computers own central processing unit (CPU) to mine bitcoin. However, that approach was soon replaced by GPU mining.
FPGA mining. Next came mining using field-programmable gate arrays (FPGAs). These greatly outperformed GPUs and CPUs in the mining process as FPGAs are chips which can be programmed to execute certain 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 purpose, in our case 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 electricity consumption. .
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Mining pools. To cancel the problem of mining a block, miners started organising in pools or cloud mining networks. Whenever a miner in one of those pools solves a block, the reward is shared with everyone in the swimming pool in a ratio representative of just how much work you put into the pool (even though you personally never solved the puzzle). .
Cloud mining. Clouds provide potential miners the ability to purchase mining channels in a remote data centre location. There are many obvious advantages, the most obvious beingno electricity costs, no excess heat and nothing to market when you opt to hang your virtual pickaxe.
Once miners receive bitcoin, they are given a digital key to the bitcoin addresses. You can use this electronic key to gain access and confirm or approve transactions.
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Desktop wallets. Software like Bitcoin Core lets you send and save bitcoin addresses and also connects to find out here the network to track transactions.
Online wallets. Bitcoin keys are saved online by exchange programs like Coinbase or Circle and can be accessed from anywhere.
Mobile wallets. Apps like Blockchain shop and encrypt your own bitcoin keys so you can make payments using your mobile device.
Paper wallets. Some sites provide paper wallet solutions, generating a piece of paper with two QR codes on it. One code is the public address where you receive bitcoin and the other is your private address you can use for spending.