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But 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 that in a Really creative manner I love to call Who Wants to Be a Banker
In a nutshell, anyone who wants to take part in updating the ledger of 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 done by your computer. The more powerful your computer is, the further supposes you can make in one 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 system determines which of the current pending transactions will be grouped together into the next block of transactions. Compiling this block represents the moment of glory, as youve now become a temporary banker of Bitcoin who gets 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 affirm it. Its a bit much like some Rubiks cube: The solution is quite tough to attain but very easy to validate.
3. Each computer which validates your solution upgrades its copy of this Bitcoin transaction ledger together with the transactions you chose to include in the cube.
4. The machine generates a predetermined amount of bitcoins (currently 12.5) and benefits 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 that 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 are virtually irreversible.
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Therefore 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 component is merely a by-product of this transaction confirmation procedure. So that the name is somewhat 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, that the miners with more computing power will succeed more often, but due to the regulation of statistical probability, its highly unlikely that the exact same miner will succeed each 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, crafted the principles for mining in a manner that the more mining power the network gets, i was reading this the harder it is to guess the answer to the mining mathematics problem. So the difficulty of this mining process is actually self-adjusting to the accumulated mining power the network possesses. .
If more miners join, it is going to get more difficult to address the problem; when many of them drop 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 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 made a sort 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 great deal of miners on the market. In reality, Satoshi, the inventor of Bitcoin, and also his friend Hal Finney were a couple of the only people 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 difficulty was low. As Bitcoin started to catch on, people looked for more powerful mining solutions.