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However, just 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 work
Well, Bitcoins rulesalso known as the Bitcoin protocolsolves that in a Really creative way I love to call Who Wants to Be a Banker
In a nutshell, anyone who wants to take part in updating the ledger of all Bitcoin transactions, known as the blockchain, can do this. Whatever you need is to guess a random number that solves an equation generated by the computer system. Sounds easy, right
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Of course, this guessing is done by your PC. The stronger your computer is, the more supposes you can make in one second, increasing your chances of winning this game. 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 right suspect, your mining system determines which of the current pending transactions will be grouped together into the next block of transactions. Compiling this block represents the moment of glory, as youve now develop into a temporary banker of Bitcoin who has to upgrade the Bitcoin transaction ledger known as the blockchain. .
2. The block youve created, along with your solution, is sent to the whole network so other computers can affirm it. Its somewhat much like some Rubiks cube: The solution is quite hard to achieve but quite easy to validate.
3. Every computer that validates your solution upgrades its copy of this Bitcoin transaction ledger with the transactions you chose to include in the cube.
4. The machine generates a fixed amount of bitcoins (currently 12.5) and rewards them 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 just 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 because of the simple 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 procedure. Therefore that the name is somewhat 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 each block, a different miner will guess the number and be granted the right to update the blockchain. Obviously, that the miners with more 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 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 power the network has, the harder it is to guess the answer to the mining mathematics issue. Therefore the difficulty of the mining method is really self-adjusting to the accumulated mining power the network possesses. .
If more miners join, it will get harder to solve the problem; if many of them fall off, it is going to get easier. This is known as mining difficulty.
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 acquire the most efficient and powerful 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 his friend Hal Finney were a couple of the only individuals mining Bitcoin back in the time using their own personal computers.
Using your CPU (central processing unityour computers brain and an integrated component dig this 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 powerful mining solutions.