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However, how do you create a system Which Has a decentralized ledger How can you give someone the ability to update the ledger without giving them too much powerin case they become corrupt or negligent in their work
Well, Bitcoins rulesalso known as the Bitcoin protocolsolves this in a very creative way I love to call Who Wants to Be a Banker
In a nutshell, anyone who wants to participate in updating the ledger of all Bitcoin transactions, known as the blockchain, can do this. Whatever you need is to guess a random number that solves an equation generated by the computer system. Sounds easy, right
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Obviously, this guessing is all done by your computer. The stronger your computer is, the further guesses you can make in a second, increasing your chances of winning this match. 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 pc comes up with the right suspect, your mining program determines which of these current pending transactions will be grouped together into the next block of transactions. Compiling this cube 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 generated, along with your solution, is sent to the whole network so other computers can affirm it. Its somewhat much like some Rubiks cube: The solution is quite hard to attain but very easy to validate.
3. Each computer which validates your solution upgrades its copy of this Bitcoin transaction ledger with the transactions that you opted to include in the cube.
4. The system generates a predetermined amount of bitcoins (currently 12.5) and benefits them as compensation for time and energy you spent solving the math issue.
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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. Each of the transactions in the block youve only entered are now confirmed by the Bitcoin network and are virtually irreversible.
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So thats Bitcoin mining in a nutshell. Its called mining because of the simple fact that this procedure helps mine new Bitcoins from the system. But if you think about it, the mining part is merely a by-product of this transaction confirmation process. So that the name is somewhat misleading, since the main site here goal of mining is to maintain the ledger in a decentralized manner. .
As you can imagine, since mining is based on a form of guessing, for each block, a different miner will guess the number and be granted the right to update 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, his explanation crafted the rules for mining in a manner that the further mining power the network has, the harder it is to guess the answer to the mining math issue. Therefore that the difficulty of the mining process is actually self-adjusting into the gathered mining power the network possesses. .
If more miners join, it will get harder to solve the problem; if many of them fall off, it is going to get easier. This can be known as mining difficulty.
Now, rememberthis is on average. We can have two blocks being inserted minute after minute and then wait an hour to 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 acquire the most efficient and powerful miners as soon as possible.
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When Bitcoin first started out, there werent a lot of miners on the market. In fact, Satoshi, the inventor of Bitcoin, and also his friend Hal Finney were a few the only people mining Bitcoin back at the time with 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 issue was low. Since Bitcoin began to catch on, folks looked for more potent mining solutions.