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However, how do you create a system that has a decentralized ledger How can you give someone the ability to upgrade 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 very creative manner I love to call Who Wants to Be a Banker
In a nutshell, anyone who wants to participate in updating the ledger of Bitcoin transactions, known as the blockchain, can do this. All 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 all done by your computer. The more powerful your computer is, the further supposes 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 pc comes up with the ideal 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 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 your solution, is sent to the whole network so other computers can validate it. Its somewhat much like a Rubiks cube: The solution is very tough to achieve but quite easy to validate.
3. Each computer that validates your solution upgrades its copy of this Bitcoin transaction ledger together 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 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 just entered are now confirmed by the Bitcoin network and therefore are virtually irreversible.
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Therefore thats Bitcoin mining in a nutshell. Its called mining because of the fact that this process helps mine new Bitcoins from the computer system. But if you think about it, the mining component is merely a by-product of this 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 form of guessing, for every check my site block, a different miner will guess the number and be granted the right to upgrade the blockchain. Obviously, the miners with computing power will succeed more often, but due to the regulation of statistical probability, its highly unlikely that the exact same miner will succeed each time. .
Now that you know what Bitcoin mining is, you may be thinking, Cool! Free click to read 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 more mining power the network has, the harder it is to guess the answer to the mining mathematics issue. So that the difficulty of the mining method is really self-adjusting into the gathered 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 will get easier. This is known as mining difficulty.
Now, rememberthis is on average. We can have two blocks 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 get the most efficient and strong miners as soon as possible.
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When Bitcoin first started out, there werent a great deal of miners out there. In fact, Satoshi, the inventor of Bitcoin, and his friend Hal Finney were a couple of the only people mining Bitcoin back at the time with 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.