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However, just how do you create a system Which 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 this in a very creative way I like 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 system. Sounds simple, right
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Obviously, this guessing is all done by your computer. The stronger your computer is, the more guesses you can create in one second, increasing your chances of winning this match. If you manage to guess 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 pc comes up with the right guess, your mining program determines which of these current pending transactions will be grouped together into the next block of transactions. Compiling this cube 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 the solution, is sent to the entire network so other computers can affirm it. Its a bit similar to some Rubiks cube: The solution is quite hard to attain but quite easy to validate.
3. Every computer that validates your solution updates its copy of the Bitcoin transaction ledger together with the transactions you opted to include in the block.
4. The system generates a fixed amount of bitcoins (currently 12.5) and benefits 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. Each of the transactions his explanation 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 fact that this procedure helps mine new Bitcoins from the system. But if you think about it, the mining component is just a by-product of this transaction confirmation procedure. Therefore that 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. Of course, the miners with more 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 manner that the further mining power the network has, the harder it is to imagine the answer to the mining math problem. Therefore the difficulty of this mining method is actually self-adjusting to the accumulated mining power the network owns. .
If more miners join, it is going to get more difficult to solve the problem; if many of them fall off, it is going to get easier. This can be known as mining issue.
Now, rememberthis is on average. We can have two cubes being added minute after minute and then wait an hour for 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 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 few the only people 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 difficulty was low. As Bitcoin started to catch on, people looked for more potent mining solutions.