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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 worthwhile 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 potent processor whose sole objective is to assist your computers graphics card in rendering 3D graphics. GPUs are not constructed for executive decisions (like CPUs) but to be very good laborers, hence GPUs can execute over 800 times more instructions in precisely the exact same amount of time as a CPU.
FPGA mining. Next came mining using field-programmable gate arrays (FPGAs). These significantly outperformed GPUs and CPUs in the mining process as FPGAs are processors 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 processors designed for a particular purpose, in our case mining bitcoin, and nothing else. ASICs for bitcoin were introduced in 2013 and, as of November 2017, they are the best processors out there for mining bitcoin and they outperform FPGAs in electricity consumption. .
Mining pools. To offset the problem of mining a block, miners started organizing in pools or cloud mining networks. Whenever a miner in one of those pools solves a block, the reward 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 puzzle). .
Cloud mining. Clouds offer potential miners the capability to purchase 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 opt to hang up your virtual pickaxe.
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Once miners receive bitcoin, they are given a digital key to the bitcoin addresses. You can use this digital key to gain access and confirm or approve transactions.
Desktop pockets. Software like Bitcoin Core allows you to send and save bitcoin addresses and connects to the network to monitor transactions.
Online wallets. Bitcoin keys are stored online by exchange programs like Coinbase or Circle and can be accessed from anywhere.
Mobile wallets. Programs like Blockchain store and encrypt your bitcoin keys so you can make payments using your cellular device.
Paper wallets. Some sites provide paper wallet services, generating a piece of paper with 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.
Hardware wallets. You can use a USB device made specifically to keep bitcoin electronically and your private address keys.
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Making money mining bitcoin is significantly more difficult today. Some of the problems contributing to the difficulty include:
Hardware rates. The days of mining using a standard CPU or graphic card have been gone. As more people have begun mining, the my response difficulty of solving the puzzles has overly increased. ASIC microchips were developed to process the computations faster and have become necessary to be successful at mining now. These chips can cost $3,000 or more and are guaranteed to additional increase in price with each improvement and upgrade. .
Rise in corporate miners. Hobby miners must now compete with for-profits and their bigger, better machines when mining to make a buck.
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Electricity expenses. Power in the United States is more expensive than it's in other parts of the world, making it more difficult to compete with big-miner money.
When discussing the feasibility of bitcoin mining, an unexpected variable rears its head: electricity consumption. This catches a lot of potential miners off-guard. All things considered, we seldom consider how much power our electrical appliances are consuming. But computing hashes is a really intensive process, pushing whatever processor youre using into the limitation, and to its maximum energy consumption.
If youre using CPU/GPU/FPGA to mine, the answer is a definite no. As of November 2017, the BTC reward is so small that it doesnt pay for the energy your computer will consume to verify a block.
This leaves us with Pools, ASICs and Cloud Mining. If youre not willing to put a lot of money into setting up a mining operation, your best option might be to receive a cloud mining rig. These are comparatively low price, and require no hardware knowledge to begin, no excess power bills, and you wont end up using a machine you cant sell when bitcoin mining is no longer profitable. .