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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 a lot of 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 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 so. All you need is to guess a random number that solves an equation generated by the system. Sounds easy, 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 make in a second, increasing your chances of winning this game. If you manage to guess 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 ideal guess, your mining program determines which of these 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 affirm it. Its somewhat similar to some Rubiks cube: The solution is quite hard to achieve but quite easy to validate.
3. Every computer which validates your solution upgrades its copy of this 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 benefits them 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 which were attached to the transactions you inserted into the next block.
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6. Each of the transactions in the block youve only entered are now confirmed by the Bitcoin network and are virtually irreversible.
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Therefore thats Bitcoin mining in a nutshell. Its called mining due to the simple fact that this process 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 goal 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 upgrade the blockchain. Of course, 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 that 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 problem. So the difficulty of the mining process is really self-adjusting to the accumulated mining power the network owns. .
If more miners join, it is going to get more difficult to address the problem; if many of them drop off, it is going to get easier. This can be known as mining issue.
Now, remember, this 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 will even out to ten minutes on average.
As you can imagine, this type of self-adjusting mechanism has created a sort 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 lot official site of miners on the market. In reality, Satoshi, the inventor of Bitcoin, and his friend Hal Finney were a couple of the only people mining Bitcoin back in the time using their own personal computers.
Using your CPU (central processing unityour computers brain and an integrated component click to read 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.