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But how can you create a system Which 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 work
Well, Bitcoins rulesalso known as the Bitcoin protocolsolves that in a Really creative manner 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 easy, right
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Obviously, this guessing is all done by your computer. The more powerful your computer is, the more guesses you can make in a second, increasing your chances of winning this match. 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 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 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 a bit much like a Rubiks cube: The solution is very tough to achieve but very easy to validate.
3. Every computer which validates your solution updates its copy of this Bitcoin transaction ledger with the transactions you opted to include in the cube.
4. The machine generates a fixed amount of bitcoins (currently 12.5) and rewards 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 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 are virtually irreversible.
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Therefore 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 component is just a by-product of this transaction confirmation procedure. Therefore 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 suppose the number and be granted the right to upgrade the blockchain. Obviously, the miners with computing power will succeed more often, but on account of the law of statistical probability, its highly unlikely that the same miner will succeed every time. .
Now 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 rules for mining in a way that the more mining energy the network gets, the harder it is to imagine the answer to the mining mathematics problem. Therefore the difficulty of the mining method is actually self-adjusting into the accumulated mining power the network owns. .
If more miners join, it is going to get more difficult to solve the problem; when many of them fall off, it will get easier. This is known as mining difficulty.
Now, rememberthis is on average. We can have two blocks being inserted 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 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 also his friend Hal Finney were a few the only individuals 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 issue was low. Since Bitcoin started to catch on, folks looked for more powerful mining solutions.