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But how do you create a system that has a decentralized ledger How can you give someone the ability to update the ledger without giving them too much powerin case they become corrupt or negligent in their job
Well, Bitcoins rulesalso known as the Bitcoin protocolsolves that in a very creative way I like 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 system. Sounds simple, right
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Of course, this guessing is done by your PC. The more powerful your computer is, the more supposes you can create in one second, increasing your chances of winning this match. If you manage to figure 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 computer comes up with the right suspect, your mining system determines which of these 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 your solution, is sent to the whole network so other computers can affirm it. Its a bit similar to a Rubiks cube: The solution is very hard to achieve but quite easy to validate.
3. Every computer that validates your solution upgrades its copy of the Bitcoin transaction ledger with the transactions you opted to include in the cube.
4. The system generates a predetermined amount of bitcoins (currently 12.5) and rewards them to you 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 cube 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 the name is somewhat 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 guess the number and also be granted the right to update the blockchain. Obviously, the miners with more computing power will succeed more often, but on account of the law of statistical probability, their website its highly unlikely that the exact 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 principles for mining in a way that the further mining energy the network gets, the harder it is to guess the answer to the mining math issue. So that the difficulty of the mining method is really self-adjusting to the accumulated mining power the network possesses. .
If more miners join, it is going to get more difficult to solve the problem; if many of them fall off, it is going to get easier. This is known as mining difficulty.
Now, remember, this is on average. We can have two blocks 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 kind of self-adjusting over at this website 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 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 reduced. Since Bitcoin began to catch on, folks looked for more potent mining solutions.