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For example, the SHA-256 of the word BUTTERFLY (source) 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 cube consists of the term BUTTERFLY discussed previously. 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 starts with a certain number of zeros, the cube is considered confirmed.
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For our example, lets say that we've a mining difficulty of just two, ie, our HASH must start with two zeros. .
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The problem: BUTTERFLY will always return the exact 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 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 because changing one small number changes the whole HASH outcome, 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, provides us a HASH that starts with two zeros. That number is your solution to the block. Here are some attempts:
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. 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, could require 2.7 million years into mine one block. .
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CPU mining. In the early days of bitcoin, mining issue was low read this and not a great deal of miners were competing for cubes and rewards. This made it rewarding visit here to utilize 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 procedure as FPGAs are chips which can be programmed to execute specific 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 purpose, 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 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 cloud or pools 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 how much work you put into the pool (even though you personally never solved the mystery ). .
Cloud mining. Clouds provide prospective miners the ability to buy mining channels in a remote data centre location. There are many obvious advantages, the most obvious beingno electricity expenses, no excess heat and nothing to market when you decide to hang your virtual pickaxe.
Once miners get bitcoin, they are given a digital key to the bitcoin addresses. You can use this digital key to gain access and validate or approve transactions.
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Desktop wallets. Software like Bitcoin Core lets you send and save bitcoin addresses and also connects to the network to monitor transactions.
Online wallets. Bitcoin keys are stored online by exchange platforms like 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 mobile device.
Paper wallets. Some sites provide paper wallet services, generating a piece of paper using two QR codes on it. One code is your public address where you receive bitcoin and the other one is the personal address you can use for spending.