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However, just how can you create a system Which Has a decentralized ledger How can you give someone the ability to upgrade 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 this in a very creative manner I like to phone Who Wants to Be a Banker
In short, anyone who wants to participate in updating the ledger of all Bitcoin transactions, known as the blockchain, can do this. All you need is to guess a random number that solves an equation generated by the computer system. Sounds easy, right
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Obviously, this guessing is done by your computer. The stronger your computer is, the further guesses you can make in a 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 pc comes up with the ideal 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 your 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 whole network so other computers can validate it. Its a bit similar to a Rubiks cube: The solution is very tough to attain but quite easy to validate.
3. Every computer that validates your solution upgrades its copy of this Bitcoin transaction ledger with the transactions that you opted to include in the cube.
4. The machine generates a predetermined amount of bitcoins (currently 12.5) and rewards 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 which were attached to the transactions you inserted into the next block.
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6. All the transactions in the block youve only entered are now confirmed from the Bitcoin network and therefore are virtually irreversible.
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So thats Bitcoin mining in a nutshell. Its called mining because of the simple fact that this procedure helps mine new Bitcoins from the system. But if you think about it, the mining part is merely 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 form of guessing, for every block, a different miner will guess the number and also be granted the right to upgrade the blockchain. Obviously, the miners with computing power will succeed more often, but on account of 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 manner that the further mining energy the network has, the harder it is to imagine the answer to the mining mathematics problem. Therefore that the difficulty of the mining process is actually self-adjusting to the accumulated mining power the network possesses. .
If more miners join, it will get more difficult to solve the problem; when 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 to 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 created a sort of arms race to acquire the most official statement 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 difficulty was reduced. As Bitcoin started to catch on, folks looked for more potent mining solutions.