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For instance, the SHA-256 of the term BUTTERFLY (source) is 8c62ace4f9ef8ccd08ca6fb992a8524bb7dbdc0530654bd254c9da07a660949a (HASH). This seemingly random string of letters and numbers has three important properties:

Bitcoin mining involves three variables: the block, the mining issue and a random number. Heres how it all comes together:

Imagine our block consists of the term BUTTERFLY discussed previously. In reality, the block would contain a listing 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 confirmed.

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

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The difficulty: BUTTERFLY will return the exact same HASH, and it doesnt begin with two zeros. Thus what we need is the third factor, a random number (known as a NONCE). We take this number, combine it with BUTTERFLY, and HASH again. If it doesnt begin with two zeros, we change the number and try again, and because changing one small number changes the entire HASH outcome, there is no way 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, gives 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 what creates bitcoin mining such a computationally expensive procedure, 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 take 2.7 million years to mine one block. .

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

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CPU mining. In the first days of bitcoin, mining difficulty was reduced 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 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 help your own computers graphics card in rendering 3D graphics. GPUs are not built for executive decisions (such as CPUs) but to be very good labourers, hence GPUs are able to execute over 800 times more instructions in precisely the same amount of time as a CPU.

FPGA mining. Next came mining with field-programmable gate arrays (FPGAs). content These greatly outperformed GPUs and CPUs in the mining procedure as FPGAs are chips that can be programmed to perform specific 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 processors 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're the best processors out there for mining bitcoin and they outperform FPGAs in power consumption. .

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Mining pools. To cancel the difficulty of mining a block, miners started organising in pools or cloud mining networks. Whenever a miner in one of these pools simplifies a cube, the reward is shared with everyone in the swimming pool in a ratio representative of just my link how much work you put into the pool (even though you personally never solved the mystery ). .

Cloud mining. Clouds offer potential miners the capability to buy mining rigs in a remote data centre location. There are many obvious advantages, the most obvious being: no electricity expenses, no excess heat and nothing to sell when you decide to hang up your virtual pickaxe.

Once miners get bitcoin, they are given a virtual key to the bitcoin addresses. You can use this electronic key to access and confirm or approve transactions.