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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 contains 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 cube consists of the term BUTTERFLY discussed earlier. In fact, the block 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 have a mining problem of just two, ie, our HASH should begin 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 the third variable, a random number (called 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 little number changes the whole HASH result, there's absolutely no way to forecast 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 gives the solution is what creates bitcoin mining such a computationally expensive process, and as more miners join the network, the harder 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, could take 2.7 million years into mine one block. .

This has caused the growth of ASIC computers constructed particularly 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 reduced and not a lot of miners were competing for blocks and rewards. This made it rewarding to utilize 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 purpose is check these guys out to assist your computers graphics card in rendering 3D graphics. GPUs are not constructed for executive decisions (such as CPUs) but to be somewhat great labourers, hence GPUs can execute over 800 times more instructions in precisely the 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 procedure as FPGAs are chips that can be programmed to perform 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 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 offset the problem of mining a block, miners started organising in pools or cloud 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 offer potential miners the ability to purchase mining rigs in a remote data centre location. There are many obvious advantages, the most obvious being: no energy costs, no excess heat and nothing to sell when you opt 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 wallets. Software such as Bitcoin Core lets you send and save bitcoin addresses and also try here connects to the network to track transactions.

Online wallets. Bitcoin keys are saved online by exchange programs like Coinbase or Circle and can be retrieved from anywhere.

Mobile wallets. Apps like Blockchain shop and encrypt your bitcoin keys so that you can make payments using your mobile device.

Paper wallets. Some websites provide paper wallet solutions, generating a piece of paper with two QR codes on it. One code is the public address where you get bitcoin and the other one is the private address you can use for spending.