How To Earn Bitcoins Fast for Dummies

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 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 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 simple test: If the HASH result of the block begins with a certain number of zeros, the block is considered verified.

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For instance, lets say that we have a mining difficulty of simply two, ie, our HASH should begin with two zeros. .

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The problem: BUTTERFLY will always return the same HASH, and it doesnt begin with two zeros. Thus what we need is the next 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 little number changes the whole HASH outcome, there's absolutely no method to predict 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 process 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. At 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 rise of ASIC computers built particularly for mining and also to an increase in cloud mining.

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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 blocks 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 built for executive decisions (such as CPUs) however to be very good 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 with field-programmable gate arrays (FPGAs). These significantly outperformed GPUs and CPUs in the mining process as FPGAs are processors that can be programmed to execute specific instructions and only those instructions webpage (instead of being repurposed for mining, like GPUs were).

ASIC mining. Similar to FPGAs, application-specific integrated circuits are processors designed for a specific function, in our situation mining bitcoin, and nothing else. ASICs for bitcoin were introduced in 2013 and, as of November 2017, they are the Bonuses best processors available 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 payoff is shared with everyone in the swimming pool in a ratio representative of just how much work you put into the pool (even though you personally never solved the mystery ). .

Cloud mining. Clouds provide prospective miners the capability to purchase mining rigs in a remote data centre location. There are many obvious advantages, the most obvious beingno electricity expenses, no extra heat and nothing to sell when you opt to hang up your virtual pickaxe.

Once miners receive bitcoin, they are given a digital imp source key to the bitcoin addresses. You can use this electronic key to gain access and confirm or approve transactions.

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Desktop pockets. Software like Bitcoin Core allows you to send and store bitcoin addresses and also connects to the network to monitor transactions.

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

Mobile wallets. Programs like Blockchain store and encrypt your own bitcoin keys so that you can make payments using your cellular device.

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