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However, 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 too much powerin case they become corrupt or negligent in their work
Well, Bitcoins rulesalso known as the Bitcoin protocolsolves that in a very creative manner I love to call Who Wants to Be a Banker
In short, anyone who wants to take part in updating the ledger of 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 computer. The stronger your computer is, the more supposes you can make in a second, increasing your chances of winning this game. If you manage to figure correctly, 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 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 your moment of glory, as youve now develop into a temporary banker of Bitcoin who gets to upgrade the Bitcoin transaction ledger known as the blockchain. .
2. The block youve created, along with your solution, is sent to the entire network so other computers can validate it. Its a bit similar to some Rubiks cube: The solution is quite tough to achieve but quite easy to validate.
3. Each computer which validates your solution upgrades its copy of the Bitcoin transaction ledger with the transactions you chose to include in the cube.
4. The system 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 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 from the Bitcoin network and are virtually irreversible.
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Therefore thats Bitcoin mining in a nutshell. Its called mining due to the 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. So the name is a bit misleading, since the main objective of mining is 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 also be granted the right to update the blockchain. Obviously, that the miners with computing power will succeed more often, but due to the law of statistical probability, navigate to this site its highly unlikely that the same miner will succeed every time. .
Now you know what Bitcoin mining is, you may 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 gets, the harder it is to imagine the answer to the mining math issue. So the difficulty of this mining process is really self-adjusting into the gathered mining power the network owns. .
If more miners join, it will get more difficult to address the problem; when many of them drop off, it is going to get easier. This can be known as mining difficulty.
Now, remember, this 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 type of self-adjusting mechanism has created a type of arms race to get 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 out there. In fact, Satoshi, the inventor of Bitcoin, and his friend Hal Finney were a couple of the only people mining Bitcoin back at the time using 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 reduced. Since Bitcoin began to catch on, people looked for more powerful mining solutions.