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However, just how do you create a system Which Has a decentralized ledger How do you give someone the ability to upgrade the ledger without giving them a lot of powerin case they become corrupt or negligent in their work
Well, Bitcoins rulesalso known as the Bitcoin protocolsolves that in a very creative manner I love to call 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. Whatever 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 all done by your computer. The more powerful your computer is, the more guesses 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 right suspect, your mining system determines which of the current pending transactions will be grouped together into the next block of transactions. Compiling this cube 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 much like a Rubiks cube: The solution is very tough to achieve but quite easy to validate.
3. Every 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 fixed amount of bitcoins (currently 12.5) and benefits them 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 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 therefore are virtually irreversible.
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Therefore thats Bitcoin mining in a nutshell. Its called mining because of the 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 the transaction confirmation process. Therefore that 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 form of guessing, for each block, a different miner will guess the number and be granted the right to update the blockchain. Obviously, that the miners with computing power will succeed more often, but due to the regulation of statistical probability, its highly unlikely that the 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 more mining power the network has, the harder it is to imagine the answer to the mining math issue. Therefore that the difficulty of the mining process is actually self-adjusting to the gathered mining capability the network owns. .
If more miners join, it is going to get more difficult to address the issue; if many of them fall off, it will get easier. This is known as mining difficulty.
Well, he wanted to make a steady stream of new bitcoins into the computer system. In a sense, this was done to keep inflation in check. Mining issue is set so that, on average, a new block will be added every ten minutes (i.e., the number is going to be figured each ten minutes on average). .
Now, remember, this is on average. We can have two cubes 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 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 lot of miners on the market. In fact, Satoshi, the inventor Read Full Report of Bitcoin, and also his friend Hal Finney were a few the only individuals 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 issue was low. Since Bitcoin started to catch on, folks looked for more potent mining solutions.