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However, how do you create a system that has a decentralized ledger How do you give someone the ability to update the ledger without giving them too much powerin case they become corrupt or negligent in their job
Well, Bitcoins rulesalso known as the Bitcoin protocolsolves this in a Really creative manner I love to call Who Wants to Be a Banker
In short, anyone who wants to participate 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 system. Sounds easy, right
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Obviously, this guessing is done by your computer. The more powerful your computer is, the further guesses you can create in a second, increasing your chances of winning this game. If you manage to guess correctly, you earn bitcoins and have to write the next page of Bitcoin transactions on the blockchain. .
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1. Once your mining computer comes up with the ideal guess, your mining system determines which of the current pending transactions will be grouped together into the next block of transactions. Compiling this cube represents the 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 generated, along with the solution, is sent to the entire network so other computers can validate it. Its a bit similar to a Rubiks cube: The solution is quite tough to achieve but quite easy to validate.
3. Every computer which validates your solution updates its copy of the Bitcoin transaction ledger together with the transactions that you opted to include in the cube.
4. The system generates a fixed amount of bitcoins (currently 12.5) and rewards them to you as compensation for time and energy you spent solving the math problem.
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5. Additionally, you get paid any transaction fees which were attached to the transactions you inserted into the next block.
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6. All the transactions in the cube youve just entered are now confirmed from the Bitcoin network and therefore are virtually irreversible.
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So thats Bitcoin mining in a nutshell. Its called mining because of the fact that this procedure helps mine new Bitcoins from the system. But if you think about it, the mining part is just a by-product of this transaction confirmation procedure. So that the name is a bit misleading, since the main objective of mining would be to maintain the ledger in a decentralized manner. .
As you can imagine, since mining is based on a type of guessing, for each block, a different miner will guess the number and be granted the right to upgrade the blockchain. Obviously, the miners with more computing power will succeed more often, but on account of the law of statistical probability, its highly unlikely that the exact same miner will succeed every time. .
Now that you know what Bitcoin mining is, you may 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 energy the network has, the harder it is to guess the answer to the mining math issue. So that the difficulty of this mining method is really self-adjusting into the accumulated mining capability the network owns. .
If more miners join, it is going to get harder to address the issue; when many of them drop off, it will get easier. This can be known as mining issue.
Now, remember, this is on average. We can have two cubes being added minute after minute and then wait an click here to find out more hour to the next block. In the long run, this may even out to ten minutes on average.
As you can imagine, this type of self-adjusting mechanism has made a sort of arms race to acquire 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 couple of 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 began to catch on, people looked for more potent mining solutions.