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But just how do you create a system that has a decentralized ledger How do you give someone the ability to upgrade 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 manner I love to phone Who Wants to Be a Banker
In short, anyone who wants to take part 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 easy, right
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Of course, this guessing is all done by your PC. The more powerful your computer is, the further guesses you can create in a second, increasing your chances of winning this game. If you manage to guess correctly, you earn bitcoins and get to write the next page of Bitcoin transactions on the blockchain. .
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1. Once your mining pc comes up with the ideal guess, your mining system determines which of the 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 upgrade the Bitcoin transaction ledger known as the blockchain. .
2. The block youve generated, along with the solution, is sent to the whole network so other computers can affirm it. Its somewhat much like some Rubiks cube: The solution is quite tough to attain but very easy to validate.
3. Each computer that validates your solution upgrades its copy of this Bitcoin transaction ledger with the transactions that you chose to include in the cube.
4. The machine generates a predetermined amount of bitcoins (currently 12.5) and benefits them as compensation for the 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. All the transactions in the block youve just 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 because of the simple fact that this process helps mine new Bitcoins from the computer system. But if you think about it, the mining part is just a by-product of the transaction confirmation process. Therefore that 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 update the blockchain. Of course, that the miners with computing power will succeed more often, but due to the regulation of statistical probability, its highly unlikely that the same miner will succeed each time. .
Now that 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 manner that the more mining power the network gets, the harder it is to guess the answer to the mining mathematics problem. Therefore the difficulty of this mining method is really self-adjusting into the accumulated mining power the network owns. .
If more miners join, it will get harder to address the issue; if many of them drop off, it is going to get easier. This can be known as mining difficulty.
Now, rememberthis is on average. We can have two cubes being inserted 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 type of self-adjusting mechanism has created a sort 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 out there. In reality, Satoshi, the inventor of Bitcoin, and his friend Hal Finney were a few the only individuals mining Bitcoin back at the time using their own personal computers.
Using your CPU (central processing unityour computers brain and he said an integrated component in any computer) was enough for mining Bitcoin back in 2009, since mining issue was reduced. Since Bitcoin began to catch on, folks looked for more powerful mining solutions.