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However, how do you create a system that has a decentralized ledger How can you give someone the ability to upgrade 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 this in a very creative way I love 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 so. All you need is to guess a random number that solves an equation generated by the computer system. Sounds simple, right
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Of course, this guessing is done by your computer. The stronger 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 pc comes up with the ideal guess, your mining program 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 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 quite tough to attain but very easy to validate.
3. Every computer which validates your solution upgrades its copy of the Bitcoin transaction ledger 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 issue.
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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 block youve just entered are now confirmed from the Bitcoin network and therefore are virtually irreversible.
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Therefore 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 component is merely a by-product of this transaction confirmation procedure. Therefore the name is a bit misleading, since the main goal of mining is to maintain the ledger in a decentralized manner. .
As you can imagine, reference since mining is based on a form 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 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 every time. .
Now that you know what Bitcoin mining is, you might 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 manner that the further mining energy the network has, the harder it is to imagine the answer to the mining math issue. So the difficulty of the mining process is actually self-adjusting into the accumulated mining capability the network possesses. .
If more miners join, it is going to get harder to solve the issue; if many of them drop off, it will get easier. This can be known as mining issue.
Now, rememberthis is on average. We can have two cubes 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 type of self-adjusting mechanism has made 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 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. Since Bitcoin started to catch on, people looked for more potent mining solutions.