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However, just 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 this in a Really creative way I love to phone 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 so. Whatever you need is to suppose a random number that solves an equation generated by the computer system. Sounds simple, right
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Obviously, this guessing is all done by your PC. The more powerful your computer is, the further guesses you can make 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 computer comes up with the ideal guess, your mining program 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 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 entire network so other computers can affirm it. Its somewhat much like some Rubiks cube: The solution is very tough to achieve but very easy to validate.
3. Every computer that validates your solution upgrades its copy of the Bitcoin transaction ledger together with the transactions you chose to include in the block.
4. The machine generates a fixed amount of bitcoins (currently 12.5) and rewards them to you 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 next page 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 process helps mine new Bitcoins from the system. But if you think about it, the mining component is just a by-product of the transaction confirmation procedure. So 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 every block, a different miner will suppose the number and be granted the right to update the blockchain. Obviously, that the miners with more computing power will succeed more often, but on account of the law of statistical probability, its highly unlikely that the exact 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 energy the network gets, the harder it is to guess the answer to the mining math problem. So the difficulty of this mining method is really self-adjusting into the accumulated mining capability the network owns. .
If more miners join, it will get more difficult to address the issue; when many of them drop off, it is going to get easier. This can be known as mining issue.
Now, rememberthis is on average. We can have two blocks 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 acquire 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 fact, Satoshi, the inventor of Bitcoin, and his friend Hal Finney were a few 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. As Bitcoin started to catch on, people looked for more powerful mining solutions.