Bitcoin mining is a record-keeping service. Bitcoin miner is a computer specifically designed to solve computational problems according to the “proof of work” algorithm. Miners keep the block chain (public ledger that records bitcoin transactions) steady and complete. They manage it by repeatedly verifying and collecting new transactions into a block (an entity that holds transactions). There is more that is stored in the blocks: a cryptographic hash of the previous block. The algorithm used is SHA-256. Its purpose is to connect the new block to its previous one. There is one more component that the block contains and it is called “proof of work”. It asks the miners to find a number, known as nonce. This number being hashed alongside the block content produces a result that is smaller than the difficulty target of the Bitcoin network. The proof is fairly easy to verify but it takes huge amounts of time to be generated. Miners have to try great quantities of numbers (nounces) before meeting the difficulty target. There is a clear example showing that in the span of 1 year (2014-2015) the number on nounces that had to be tried before creating the block went from 16 quintillion to 200 quintillion (more than 12 times).
How it started?
At the very beginning, CPU (central processing unit) was used to mine, but soon this was not fast enough and it consumed too much electricity. As a result miners quickly switched to GPU (graphical processing unit). The reason was that they were able to hash data a lot faster (on average 75 times faster) and consumed much less power .
In 2011, new devices flood the market. They were based on field-programmable gate array (FPGA) processors that used less power than the CPU and GPU. Moreover, these devices were very easy to use as they were attached to computers using a USB connection.
ASICs (Application-specific integrated circuit) have taken over and are currently the best option referring mining. ASIC is an integrated circuit (IC) customized for a particular use that can mine at very high speeds while consuming much less power than the devices we spoke about.