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However, how do 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 that in a Really creative manner I love to phone Who Wants to Be a Banker

In short, anyone who wants to participate in updating the ledger of all 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 simple, right

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Of course, this guessing is 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 figure correctly, you earn bitcoins and have to write the next page of Bitcoin transactions on the blockchain. .

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1. Once your mining computer comes up with the right 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 your 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 created, 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 very hard to achieve but very easy to validate.

3. Each computer that validates your solution upgrades its copy of this Bitcoin transaction ledger together with the transactions that you opted to include in the cube.

4. The system generates a fixed amount of bitcoins (currently 12.5) and rewards them 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. All the transactions in the block youve only entered are now confirmed from the Bitcoin network and 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 system. But if you think about it, the mining part is merely a by-product of this 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 guess the number and also be granted the right to upgrade the blockchain. Of course, that the miners with more computing power will go to these guys succeed more often, but due to the regulation of statistical probability, its highly unlikely that the exact same miner will succeed every time. .

Now you know what Bitcoin mining is, you may 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 more mining energy the network gets, the harder it is to imagine the answer to the mining math problem. Therefore the difficulty of the mining method is actually self-adjusting into the accumulated mining capability the network possesses. .

If more miners join, it will get more difficult to solve the issue; if many of them drop off, it will get easier. This can be 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 inserted each ten minutes (i.e., the number is going to probably be figured every ten minutes on average). .

Now, remember, this is on average. We can have two cubes being added 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 made a type 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, click to investigate Satoshi, the inventor of Bitcoin, and also his friend Hal Finney were a couple of the only people 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 low. As Bitcoin started to catch on, investigate this site people looked for more powerful mining solutions.