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But just how can 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 Really creative way I love to phone 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 suppose a random number that solves an equation generated by the system. Sounds easy, right
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Obviously, this guessing is all done by your PC. The more powerful your computer is, the further supposes you can make in one second, increasing your chances of winning this game. If you manage to figure 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 computer comes up with the ideal guess, your mining system 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 has to upgrade the Bitcoin transaction ledger known as the blockchain. .
2. The block youve created, along with the solution, is sent to the entire network so other computers can validate it. Its somewhat much like a Rubiks cube: The solution is quite hard to attain but quite easy to validate.
3. Each computer which validates your solution updates its copy of this Bitcoin transaction ledger together with the transactions that you chose to include in the cube.
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 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 fact that this procedure helps mine new Bitcoins from the computer system. But if you think about it, the mining component is just a by-product of the transaction confirmation process. So the name is a bit misleading, since the main objective 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 next law of statistical probability, its highly unlikely that the exact 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 rules for mining in a way that the more mining energy the network gets, the harder it is to guess the answer to the mining mathematics issue. So the difficulty of the mining method is actually self-adjusting into 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 is going to get easier. This is known as mining issue.
Now, remember, this is on average. We can have two blocks being added 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 created a type 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 out there. In reality, Satoshi, the inventor of Bitcoin, and 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. As Bitcoin began to catch on, people looked for more powerful mining solutions.