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But 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 Really creative manner I love to phone Who Wants to Be a Banker
In short, anyone who wants to take part in updating the ledger of all Bitcoin transactions, known as the blockchain, can do so. All you need is to suppose a random number that solves an equation generated by the computer system. Sounds simple, right
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Obviously, this guessing is all 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 guess 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 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 your moment of glory, as youve now become a temporary banker of Bitcoin who has to update the Bitcoin transaction ledger known as the blockchain. .
2. The block youve generated, along with your 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 attain but quite easy to validate.
3. Every computer which validates your solution upgrades its copy of this Bitcoin transaction ledger together with the transactions that you chose to include in the block.
4. The machine generates a fixed amount of bitcoins (currently 12.5) and benefits them to you as compensation for 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. Each of the transactions in the cube youve just entered are now confirmed by the Bitcoin network and are virtually irreversible.
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Therefore thats Bitcoin mining in a nutshell. Its called mining because of the imp source fact that this procedure helps mine new Bitcoins from the computer system. But if you think about it, the mining part is just a by-product of the transaction confirmation process. Therefore 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 form of guessing, for each block, a different miner will suppose the number and be granted the right to upgrade the blockchain. Obviously, that the miners with computing power will succeed more often, but on account of the law of statistical probability, its highly unlikely that the same miner will succeed each 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 principles for mining in a way that the more mining power the network gets, the harder it is to guess the answer to the mining math problem. So the difficulty Website of this mining method is actually self-adjusting into the gathered mining power the network possesses. .
If more miners join, it is going to get more difficult to solve the issue; when many of them drop off, it is going to get easier. This is known as mining difficulty.
Well, he wanted to create a steady flow 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 each ten minutes (i.e., the number is going to probably be guessed every ten minutes on average). .
Now, rememberthis is on average. We can have two blocks being inserted minute after minute and then wait an hour to 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 created 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 great deal of miners on the market. In reality, Satoshi, the inventor 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 difficulty was reduced. As Bitcoin began to catch on, folks looked for more potent mining solutions.