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However, how can you create a system that has a decentralized ledger How do you give someone the ability to upgrade 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 manner I like to call Who Wants to Be a Banker
In short, anyone who wants to participate in updating the ledger of all Bitcoin transactions, known as the blockchain, can do so. All you need is to suppose a random number that solves an equation generated by the system. Sounds simple, right
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Of course, this guessing is all done by your PC. The more powerful your computer is, the more guesses you can create in one second, increasing your chances of winning this match. If you manage to guess 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 program 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 develop into 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 entire network so other computers can affirm it. Its somewhat much like some Rubiks cube: The solution is very tough to achieve but quite easy to validate.
3. Each computer which validates your solution updates its copy of the Bitcoin transaction ledger with the transactions you chose to include in the block.
4. The system generates a fixed 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. Each of the transactions in the block youve just entered are now confirmed from the Bitcoin network and are virtually irreversible.
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Therefore thats Bitcoin mining in a read this nutshell. Its called mining due to the fact that this process helps mine new Bitcoins from the system. But if you think about it, the mining component is merely a by-product of this transaction confirmation procedure. So 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 also be granted the right to update the blockchain. Obviously, that 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 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 look at here now invented Bitcoin, crafted the rules for mining in a manner that the more mining power the network has, the harder it is to guess the answer to the mining math problem. Therefore that the difficulty of the mining method is really self-adjusting to the gathered mining power the network possesses. .
If more miners join, it is going to get harder to address 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 to 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 powerful miners as soon as possible.
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When Bitcoin first started out, there werent a lot of miners on the market. In reality, Satoshi, the inventor of Bitcoin, and also his friend Hal Finney were a few the only individuals mining Bitcoin back in 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, folks looked for more potent mining solutions.