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However, how do you create a system that has a decentralized ledger How do 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 that in a very creative manner I like to phone Who Wants to Be a Banker
In a nutshell, anyone who wants to take part 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 simple, right
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Obviously, this guessing is all done by your computer. The stronger your computer is, the more supposes you can make 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 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 has to upgrade the Bitcoin transaction ledger known as the blockchain. .
2. The block youve created, along with the solution, is sent to the entire network so other computers can affirm it. Its somewhat similar to some Rubiks cube: The solution is very tough to attain but quite easy to validate.
3. Every computer which validates your solution upgrades its copy of the Bitcoin transaction ledger with the transactions that you opted to include in the cube.
4. The machine generates a fixed amount of bitcoins (currently 12.5) and rewards them to you 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 cube youve just entered are now confirmed from the Bitcoin network and therefore are virtually irreversible.
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Therefore thats Bitcoin mining in a nutshell. Its called mining due to the fact that this procedure helps mine new Bitcoins from the system. But if you think about it, the mining component is just a by-product of the transaction confirmation procedure. Therefore that the name is a bit 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 why not find out more the number and also 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 every time. .
Now you know what more tips here 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 more mining power the network gets, the harder it is to imagine the answer to the mining mathematics problem. So the difficulty of the mining method is really self-adjusting to the gathered mining capability the network possesses. .
If more miners join, it will get more difficult to solve the problem; when many of them drop off, it will get easier. This can be known as mining difficulty.
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 kind 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 lot of miners out there. In fact, Satoshi, the inventor of Bitcoin, and his friend Hal Finney were a few the only people 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 issue was low. Since Bitcoin started to catch on, folks looked for more potent mining solutions.