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But just how do you create a system Which Has a decentralized ledger How do 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 that in a very creative manner I love to phone 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 so. Whatever you need is to guess a random number that solves an equation generated by the computer system. Sounds simple, right

 

 

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Obviously, this guessing is done by your computer. The stronger your computer is, the further guesses you can create in a second, increasing your chances of winning this game. 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 computer comes up with the right 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 the moment of glory, as youve now become a temporary banker of Bitcoin who has to update the Bitcoin transaction ledger known as the blockchain. .

2. The block youve generated, along with your solution, is sent to the entire network so other computers can affirm it. Its somewhat similar to some Rubiks cube: The solution is very hard to attain but quite easy to validate.

3. Each 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 system generates a predetermined amount of bitcoins (currently 12.5) and benefits them to you 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 only 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 procedure helps mine new Bitcoins from the computer system. But if you think about it, the mining part is merely a by-product of this transaction confirmation process. 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 type of guessing, for every block, a different miner will suppose the number and also be granted the right to upgrade the blockchain. Obviously, that the miners with more computing power will succeed more often, but on account of the law of statistical probability, its highly unlikely that the same miner will succeed each 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 manner that the further mining power the network gets, the harder it is to imagine the answer to the mining mathematics issue. Therefore that the difficulty of this mining method is really self-adjusting to the gathered mining capability the network possesses. .

If more miners join, it will get harder to solve the issue; when many of them drop off, it will get easier. This is known as mining issue.

 

 

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Well, he wanted to make a steady flow of new bitcoins into the computer system. In a sense, this was done to keep inflation in check. Mining issue is set so that, on average, a new block will be inserted every ten minutes (i.e., the number will be figured every ten minutes on average). .

Now, rememberthis 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 type of self-adjusting mechanism has made a type of arms race to acquire 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 fact, Satoshi, the inventor of Bitcoin, and also his friend Hal Finney were a couple of the only people mining Bitcoin back in 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 advice difficulty was reduced. As Bitcoin began to catch on, folks looked for more powerful mining solutions.

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