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But how do you create a system Which 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 call Who Wants to Be a Banker
In a nutshell, anyone who wants to take part in updating the ledger of Bitcoin transactions, known as the blockchain, can do this. All you need is to suppose a random number that solves an equation generated by the computer system. Sounds easy, right
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Obviously, this guessing is all done by your computer. 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 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 gets to update 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 a bit much like some Rubiks cube: The solution is very hard to attain but very easy to validate.
3. Each computer which validates your solution upgrades its copy of the Bitcoin transaction ledger together with the transactions you chose to include in the cube.
4. The system generates a fixed amount of bitcoins (currently 12.5) and benefits them as compensation for time and energy you spent solving the math issue.
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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. Each of the transactions in the cube youve only entered are now confirmed by the Bitcoin network and are virtually irreversible.
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So thats Bitcoin mining in a nutshell. Its called mining because of the fact that this procedure helps mine new Bitcoins from the computer system. But if you think about it, the mining component is merely a by-product of this transaction confirmation procedure. So 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 form of guessing, for each block, a different miner will guess the number and be granted the right to update the blockchain. Of course, the miners with more 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 more mining power the network has, the Look At This harder it is to imagine the answer to the mining mathematics issue. So the difficulty of the mining method is really self-adjusting into the accumulated mining capability the network possesses. .
If more miners join, it will get harder to solve the issue; if many of them fall off, it is going to get easier. This is known as mining difficulty.
Now, rememberthis 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 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 great deal 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. As Bitcoin began to catch on, people looked for more potent mining solutions.