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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 a lot of powerin case they become corrupt or negligent in their job
Well, Bitcoins rulesalso known as the Bitcoin protocolsolves that in a very creative way I like 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. All 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 one second, increasing your chances of winning this game. If you manage to figure 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 pc comes up with the ideal suspect, your mining system determines which of the current pending transactions will be grouped together into the next block of transactions. Compiling this block 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 generated, along with the solution, is sent to the whole network so other computers can validate it. Its a bit similar to a Rubiks cube: The solution is quite tough to attain but quite easy to validate.
3. Each computer that validates your solution updates its copy of this Bitcoin transaction ledger together with the transactions you opted to include in the block.
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 issue.
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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 block youve only entered are now confirmed from 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 process helps mine new Bitcoins from the computer system. But if you think about it, the mining helpful hints part is just a by-product of this transaction confirmation process. Therefore 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 every block, a different miner will guess the number and also be granted the right to upgrade the blockchain. Obviously, the miners with computing power will succeed more often, but due to the regulation 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, great site Cool! Free money! Where do I sign up Well, not so fast
Satoshi Nakamoto, who invented Bitcoin, crafted the principles for mining in a manner that the more mining energy the network has, the harder it is to imagine the answer to the mining math issue. So the difficulty of this mining method is really self-adjusting to the gathered mining capability the network possesses. .
If more miners join, it will get more difficult to address the issue; when many of them fall 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 added 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 strong 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 couple of the only individuals 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 Go Here difficulty was low. As Bitcoin started to catch on, folks looked for more potent mining solutions.