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However, just how can you create a system Which Has a decentralized ledger How do you give someone the ability to update the ledger without giving them a lot of 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 love to call Who Wants to Be a Banker
In short, 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 suppose a random number that solves an equation generated by the system. Sounds simple, right
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Obviously, this guessing is done by your PC. The stronger your computer is, the further supposes you can create in one second, increasing your chances of winning this match. If you manage to guess right, 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 right suspect, your mining system determines which of these 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 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 somewhat much like a Rubiks cube: The solution is quite tough to achieve but very easy to validate.
3. Each computer that validates your solution upgrades its copy of this Bitcoin transaction ledger together with the transactions you opted to include in the cube.
4. The machine generates a fixed amount of bitcoins (currently 12.5) and rewards them as compensation for 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 by the Bitcoin network and are virtually irreversible.
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So thats Bitcoin mining in a nutshell. Its called mining due to the simple 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 the transaction confirmation procedure. Therefore 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 each block, a different miner will suppose the number and also be granted the right to upgrade the blockchain. Obviously, that the miners with computing power will succeed more often, but due to the law of statistical probability, its highly unlikely that the same miner will succeed every time. .
Now that 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 further mining energy the network gets, the harder it is to guess the answer to the mining mathematics issue. So the difficulty of this mining method is actually self-adjusting into the accumulated mining power the network possesses. .
If more miners join, it is going to get harder to address the problem; when many of them drop off, it will get easier. This can be known as mining issue.
Now, rememberthis 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 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 get 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 out there. 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 potent mining solutions.