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However, how do you create a system Which Has a decentralized ledger How do you give someone the ability to update the ledger without giving them a lot of powerin case they become corrupt or negligent in their work
Well, Bitcoins rulesalso known as the Bitcoin protocolsolves that in a Really creative way I like to phone Who Wants to Be a Banker
In short, anyone who wants to take part in updating the ledger of Bitcoin transactions, known as the blockchain, can do so. Whatever you need is to guess a random number that solves an equation generated by the computer system. Sounds simple, right
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Obviously, this guessing is done by your PC. The stronger your computer is, the more guesses you can make in a second, increasing your chances of winning this game. If you manage to figure right, you earn bitcoins and get to write the next page of Bitcoin transactions on the blockchain. .
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1. Once your mining pc comes up with the right guess, your mining system determines which of these current pending transactions will be grouped together into the next block of transactions. Compiling this block represents your moment of glory, as youve now develop into a temporary banker of Bitcoin who gets to upgrade the Bitcoin transaction ledger known as the blockchain. .
2. The block youve created, along with the solution, is sent to the whole network so other computers can affirm it. Its somewhat similar to some Rubiks cube: The solution is very hard to achieve but very easy to validate.
3. Every computer which validates your solution updates its copy of the Bitcoin transaction ledger together with the transactions that you chose to include in the cube.
4. The machine generates a fixed amount of bitcoins (currently 12.5) and benefits them as compensation for time and energy you spent solving the math problem.
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5. Additionally, you get paid any transaction fees that were attached to the transactions you inserted into the next block.
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6. All the transactions in the cube youve only entered are now confirmed by the Bitcoin network and are virtually irreversible.
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Therefore thats Bitcoin mining in a nutshell. Its called mining because of the simple fact that this process helps mine new Bitcoins from the computer system. But if you think about it, the mining component is just a by-product of this transaction confirmation process. So that the name is a bit misleading, since the main objective of mining is to maintain the ledger in a decentralized manner. .
As you can imagine, since mining is based on a type of guessing, for every block, a different miner will suppose the number and be granted the right to upgrade the blockchain. Of course, that the miners with more computing power will succeed more often, but on account of the regulation of statistical probability, its highly unlikely that the same miner will succeed each time. .
Now that you know what Bitcoin mining is, you might be thinking, Cool! Free money! Where do I sign up Well, not so fast
Satoshi Nakamoto, who invented Bitcoin, crafted the principles for mining in a way that the more mining power the network gets, the harder it is to guess the answer to the mining mathematics issue. So the difficulty of the mining process is actually self-adjusting to the see here now accumulated mining power the network possesses. .
If more miners join, it is going to get more difficult to address the issue; if many of them drop off, it is going to get easier. This can be known as mining difficulty.
Now, remember, this is on average. We can have two blocks being inserted minute after minute and then wait an hour for the next block. In the long run, this will even out to ten minutes on average.
As you can imagine, this type of self-adjusting mechanism has created a type of arms race to get the most efficient and powerful miners as soon as possible.
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When Bitcoin first started out, there werent a great deal of miners on the market. In fact, Satoshi, the inventor of Bitcoin, and his friend Hal Finney were a few the only people mining Bitcoin back at the time using their own personal computers.
Using your CPU (central processing unityour computers brain and an integrated component in any computer) was enough for mining Bitcoin back in 2009, since mining difficulty was low. As Bitcoin started to catch on, people looked for more powerful mining solutions.