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But how can you create a system that 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 job
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 participate in updating the ledger of Bitcoin transactions, known as the blockchain, can do this. All you need is to suppose 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 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 get to write the next page of Bitcoin transactions on the blockchain. .
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1. Once your mining computer comes up with the right 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 your moment of glory, as youve now become a temporary banker of Bitcoin who has to upgrade the Bitcoin transaction ledger known as the blockchain. .
2. The block youve created, along with the solution, is sent to the entire network so other computers can validate it. Its somewhat similar to a Rubiks cube: The solution is very tough to achieve but quite easy to validate.
3. Each computer that validates your solution updates its copy of the Bitcoin transaction ledger with the transactions that you chose to include in the cube.
4. The machine generates a predetermined amount of bitcoins (currently 12.5) and rewards them to you as compensation for the 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 only entered are now confirmed from the Bitcoin network and therefore are virtually irreversible.
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Therefore thats Bitcoin mining in a nutshell. Its called mining due to the simple fact that this procedure 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 procedure. Therefore that the name is a bit misleading, since the main 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 every block, a different miner will suppose the number and be granted the right to update the blockchain. Of course, the miners with more computing power will succeed more often, but due to the law of statistical probability, its highly unlikely that the exact same miner will succeed each time. .
Now 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 rules for mining in a way that the further mining energy the network has, the harder it is to guess the answer to the mining mathematics issue. Therefore that the difficulty of the mining process is really self-adjusting into the gathered mining power the network owns. .
If more miners join, it will get more difficult to solve the problem; straight from the source if many of them drop off, it is going to get easier. This is known as mining issue.
Now, remember, this is on average. We can have two cubes being added 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 kind of self-adjusting mechanism has created a type of arms race to get the most efficient and strong miners as soon as possible.
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When Bitcoin first started out, there werent a lot of miners out there. In reality, Satoshi, the inventor of Bitcoin, and his friend Hal Finney were a few the only individuals 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 difficulty was reduced. Since Bitcoin started to catch on, people looked for more powerful mining solutions.