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Microprocessors perform operations using binary bits (on/off/1or0).
Eight bits is equal to a byte (on most modern processors), and two bytes is equal to a word.
 
As an example let's design a crude 4-bit microprocessor.
 
All registers, ALUs, counters, and addresses have a data path of 4-bit widebits.
 
Also, all of our instructions must fit in a 3-bit address.