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However, just how do 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 very creative manner I like to call 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 system. Sounds simple, right
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Obviously, this guessing is done by your PC. The stronger your computer is, the more supposes you can create in a second, increasing your chances of winning this match. If you manage to figure correctly, 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 these current pending transactions will be grouped together into the next block of transactions. Compiling this cube represents the moment of glory, as youve now develop into a temporary banker of Bitcoin who gets 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. Each computer which validates your solution upgrades its copy of the Bitcoin transaction ledger with the transactions that you opted to include in the cube.
4. The machine generates a fixed 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. Each of the page transactions in the cube youve only entered are now confirmed from the Bitcoin network and therefore are virtually irreversible.
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So thats Bitcoin mining in a nutshell. Its called mining due to the simple fact that this process helps mine new Bitcoins from the computer system. But if you think about it, the mining part is merely a by-product of this transaction confirmation process. Therefore the name is somewhat misleading, since the main objective of mining is 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. Of course, 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 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 principles for mining in a way that the more mining energy the network gets, the harder it is to guess the answer to the mining math problem. So that the difficulty of this mining method is actually self-adjusting to the gathered mining capability the network owns. .
If more miners join, it will get harder to discover here solve the issue; if 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 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 made 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 great deal of miners out there. In reality, Satoshi, the inventor of Bitcoin, and also his friend Hal Finney were a few 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 issue was reduced. As Bitcoin started to catch on, folks looked for more powerful mining solutions.