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However, just how can you create a system that has a decentralized ledger How do you give someone the ability to update 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 manner I love to phone Who Wants to Be a Banker
In a nutshell, 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 system. Sounds easy, right
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Of course, this guessing is done by your computer. The stronger your computer is, the more supposes you can create in a second, increasing your chances of winning this game. 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 these 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 update 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 validate it. Its a bit similar to some Rubiks cube: The solution is very hard to attain but quite easy to validate.
3. Each computer which validates your solution upgrades its copy of the Bitcoin transaction ledger with the transactions you opted 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 which were attached to the transactions you inserted into the next block.
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6. Each of the transactions in the cube youve only entered are now confirmed by 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 part is merely a by-product of the transaction confirmation process. Therefore that the name is a bit 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 suppose the number and be granted the right to upgrade the blockchain. Obviously, the miners with 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 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 power the network gets, the harder it is to guess the answer to the mining math issue. So the difficulty of the mining method is actually self-adjusting to the gathered mining power the network possesses. .
If more miners join, it will get harder to address the issue; when many of them drop off, it is going to get easier. This can be known as mining difficulty.
Now, remember, this is on average. We can have two cubes being added minute after minute and then wait web an hour to the next block. In the long run, this see may 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 acquire the most efficient and strong miners as soon as possible.
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When Bitcoin first started out, there werent a lot of miners out there. In reality, Satoshi, the inventor of Bitcoin, and his friend Hal Finney were a couple of the only people mining Bitcoin back at 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 difficulty was low. Since Bitcoin began to catch on, folks looked for more powerful mining solutions.