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For example, the SHA-256 of the term 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 issue and a random number. Heres how it all comes together:

Imagine our cube consists of the word BUTTERFLY discussed previously. 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 uses a simple test: If the HASH result of the block begins with a certain number of zeros, the block is considered confirmed.

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For instance, lets say that we have a mining difficulty of just two, ie, our HASH must start with two zeros. .

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The problem: BUTTERFLY will return the same HASH, and it doesnt begin with two zeros. Thus what we need is the third 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 whole HASH outcome, there is no way to predict the number well need to solve 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 tries:

This arduous process of randomly trying to find a number that supplies the solution is the thing that creates bitcoin mining such a computationally expensive process, and as more miners join the network, the tougher it gets. As of November 2017, a regular home computer working alone, ie, not an application-specific integrated circuit (ASIC) and not part of a cloud mining network, could take 2.7 million years into mine one block. .

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

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CPU mining. In the first days of bitcoin, mining difficulty was low and not a lot of miners were competing for cubes and rewards. This made it rewarding to use 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 powerful processor whose sole objective is to help your computers graphics card in rendering 3D graphics. GPUs are not constructed for executive decisions (like CPUs) however to be very good labourers, hence GPUs can execute over 800 times more instructions in the exact same amount of time as a CPU.

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 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 specific 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 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 those pools solves a block, the payoff is shared with everyone in the swimming pool in a ratio representative of just how much work you put into the swimming pool (even though you personally never solved the puzzle). .

Cloud mining. Clouds offer click reference prospective miners the ability to buy mining channels in a remote data centre location. There are many obvious advantages, the most obvious beingno energy expenses, no excess heat and nothing to sell when you decide to hang 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 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 saved online by exchange platforms such as see post Coinbase or Circle and can be retrieved 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 websites offer paper wallet services, generating a bit of paper using two QR codes on it. One code is the public address at which you get bitcoin and the other is the personal address you can use for spending.