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For example, the SHA-256 of the word BUTTERFLY (origin ) 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 cube consists of the term BUTTERFLY discussed previously. In reality, the cube would contain a list of recent, unverified transactions, but lets keep it simple. In order for the block to be solved, bitcoin uses a simple test: If the HASH result of the block starts with a certain number of zeros, the block is considered verified.
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For instance, lets say that we've a mining difficulty of just two, ie, our HASH must start with two zeros. .
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The difficulty: BUTTERFLY will always return the exact same HASH, and it doesnt start with two zeros. Thus what we need is the third variable, a random number (known as a NONCE). We carry 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 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, provides us a HASH that starts with two zeros. That number is your solution to the block. Here are some tries:
This arduous process of randomly trying to find a number that gives the solution is the thing that makes bitcoin mining such a computationally expensive procedure, and as more miners join the network, the harder it gets. As of November 2017, a normal home computer working alone, ie, not an application-specific integrated circuit (ASIC) and not part of a cloud mining network, would take 2.7 million years into mine one 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 cubes and rewards. This made it worthwhile to use your computers own central processing unit (CPU) to mine bitcoin. However, that strategy 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 processors which can be programmed to execute certain instructions and only those instructions (instead of being repurposed for mining, like GPUs were).
ASIC mining. Comparable to FPGAs, application-specific integrated circuits are chips designed for a particular function, 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 available for mining bitcoin and they outperform FPGAs in electricity consumption. .
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Mining pools. To offset 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 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 browse around this site never solved the puzzle). .
Cloud mining. Clouds provide prospective miners the ability to buy mining find here rigs in a remote data centre location. There are many obvious advantages, the most obvious beingno electricity costs, no extra heat and nothing to sell when you decide to hang up your digital pickaxe.
Once miners receive bitcoin, they are given a virtual key to the bitcoin addresses. You can use this digital key to gain access and validate or approve transactions.
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Desktop pockets. Software like Bitcoin Core allows you to send and save bitcoin addresses and also connects to the network to monitor transactions.
Online wallets. Bitcoin keys are stored 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 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 the public address at which you get bitcoin and the other is the private address you can use for spending.