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However, just how can 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 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 a nutshell, anyone who wants to take part in updating the ledger of Bitcoin transactions, known as the blockchain, can do this. All you need is to suppose a random number that solves an equation generated by the system. Sounds simple, right
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Of course, this guessing is all done by your PC. The stronger 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 get 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 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 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 somewhat much like some Rubiks cube: The solution is quite hard 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 that 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 problem.
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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 cube youve only entered are now confirmed by the Bitcoin network and are virtually irreversible.
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So 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 component is just a by-product of this transaction confirmation procedure. So 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 update the blockchain. Obviously, that the miners with computing power will succeed more often, but due to the law of statistical probability, its highly unlikely that the same miner will succeed every time. .
Now you know what Bitcoin mining is, you browse around these guys 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 more mining energy the network gets, the harder it is to imagine the answer to the mining math issue. Therefore that the difficulty of the mining process is actually self-adjusting to the accumulated mining capability the network owns. .
If more miners join, it is going to get more difficult to address the issue; if many of them drop off, it will get easier. This can be known as mining difficulty.
Now, remember, this 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 will even out to ten minutes on average.
As you can imagine, this type of self-adjusting mechanism has made a sort 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 on the market. In reality, Satoshi, the inventor of Bitcoin, and also his friend Hal Finney were a few the only individuals mining Bitcoin back in 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 difficulty was low. As Bitcoin started to catch on, people looked for more powerful mining solutions.