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However, how can you create a system Which 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 work
Well, Bitcoins rulesalso known as the Bitcoin protocolsolves this in a Really creative manner I like to phone 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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Obviously, this guessing is all done by your PC. The more powerful your computer is, the further supposes you can make in one 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 suspect, your mining system determines which of the current pending transactions will be grouped together into the next block of transactions. Compiling this block represents the 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 whole network so other computers can affirm it. Its a bit much like a Rubiks cube: The solution is very tough to attain but quite easy to validate.
3. Every computer that validates your solution updates its copy of the Bitcoin transaction ledger with the transactions you chose to include in the block.
4. The machine generates a fixed 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 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 from 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 system. But if you think about it, More about the author the mining component is just a by-product of this transaction confirmation procedure. So the name is somewhat 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 every block, a different miner will suppose the number and also be granted the right to update the blockchain. Of course, that the miners with more computing power will succeed more often, but on account of the regulation of statistical probability, 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 rules for mining in a way that the more mining power the network has, the harder it is to guess the answer to the mining math problem. So the difficulty of the mining process is really self-adjusting into the gathered mining capability the network owns. .
If more miners join, it will get harder to solve the problem; when many of them fall off, it will get easier. This can be known as mining issue.
Now, rememberthis 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 may even out to ten minutes on average.
As you can imagine, this kind of self-adjusting mechanism has made 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 on the market. In fact, Satoshi, the inventor of Bitcoin, and also his friend Hal Finney were a couple of the only individuals 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 difficulty was reduced. Since Bitcoin started to catch on, people looked for more powerful mining solutions.