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However, how do you create a system that has a decentralized ledger How can 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 that in a very creative manner I like to call Who Wants to Be a Banker

In short, anyone who wants to take part 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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Obviously, this guessing is done by your PC. The more powerful your computer is, the more guesses you can make in one second, increasing your chances of winning this match. If you manage to figure right, you earn bitcoins and get to write the next page of Bitcoin transactions on the blockchain. .

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1. Once your mining computer comes up with the ideal guess, 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 develop into a temporary banker of Bitcoin who gets to upgrade 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 affirm it. Its somewhat similar to a Rubiks cube: The solution is quite tough to achieve but quite easy to validate.

3. Each computer that validates your solution updates its copy of the Bitcoin transaction ledger with the transactions that you opted to include in the block.

4. The machine generates a predetermined 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 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 by 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 system. But if you think about it, the mining part is just a by-product of the transaction confirmation process. So the name is a bit misleading, since the main goal 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 every block, a different miner will suppose the number and also be granted the right to upgrade the blockchain. Obviously, that the miners with computing power will succeed more often, but due to the law of statistical probability, its highly unlikely that the same miner will succeed every time. .

Now 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 way that the further mining energy the network has, the harder it is to guess the answer to the mining math issue. So that the difficulty of this mining process is really self-adjusting into the gathered mining power the network owns. .

If more miners join, it is going to get harder to solve the problem; when many of them drop off, it is going to get easier. This can be known as mining difficulty.

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Well, he wanted to make a steady stream of new bitcoins into the computer system. In a sense, this has been done to keep inflation in check. Mining difficulty is set so that, on average, a new block will be added every ten minutes (i.e., the number will be figured every ten minutes on average). .

Now, rememberthis is on average. We can have two cubes being added minute after minute and then wait an hour for 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 made a type 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 lot of miners on the market. In fact, Satoshi, the inventor of Bitcoin, and also his friend Hal Finney were a couple of the only individuals 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 issue was low. Since Bitcoin began to catch on, people their explanation looked for more powerful mining solutions.

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