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But how can you create a system that has a decentralized ledger How can you give someone the ability to upgrade the ledger without giving them a lot of 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 phone 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 simple, right

 

 

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Obviously, this guessing is done by your computer. The more powerful your computer is, the more supposes you can create in one second, increasing your chances of winning this game. If you manage to figure right, 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 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 the moment of glory, as youve now develop into a temporary banker of Bitcoin who has to update 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 a bit much like some Rubiks cube: The solution is very tough to achieve but quite easy to validate.

3. Every computer which validates your solution updates its copy of this Bitcoin transaction ledger 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. Each of the transactions in the cube youve only entered are now confirmed by 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 process helps mine new Bitcoins from the computer system. But if you think about it, the mining component is just find out here now a by-product of the transaction confirmation process. Therefore that the name is somewhat 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 each block, a different miner will guess the number and be granted the right to update the blockchain. Of course, the miners with 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 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 more mining power the network has, the harder it is to imagine the answer to the mining math problem. Therefore that the difficulty of this mining process is really self-adjusting into the accumulated mining power the network owns. .

If more miners join, it will get harder to solve the problem; when many of them fall off, it will get easier. This is known as mining issue.

 

 

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Well, he wanted to make a steady flow of new bitcoins into the system. In a sense, this has been done to keep inflation in check. Mining issue is set so that, on average, a new block will be added each ten minutes (i.e., the number will probably be guessed each ten minutes on average). .

Now, rememberthis is on average. We can have two cubes being added minute after minute and then wait an hour for the next block. In the long run, this may even out to ten minutes on average.

As you can imagine, this kind of self-adjusting mechanism has created a sort of arms race to acquire the most efficient and strong 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 in 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 low. As Bitcoin started to catch on, folks looked for more powerful mining solutions.

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