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However, how do you create a system Which 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 job
Well, Bitcoins rulesalso known as the Bitcoin protocolsolves that in a Really creative way I love to phone Who Wants to Be a Banker
In a nutshell, anyone who wants to participate in updating the ledger of all 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 system. Sounds easy, right
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Of course, this guessing is done by your PC. The stronger your computer is, the further supposes you can make in a second, increasing your chances of winning this game. 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 right suspect, your mining program 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 develop into 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 affirm it. Its somewhat much like a Rubiks cube: The solution is very tough to attain but very easy to validate.
3. Each computer that validates your solution upgrades its copy of this Bitcoin transaction ledger together with the transactions that you chose to include in the block.
4. The system generates a fixed amount of bitcoins (currently 12.5) and rewards 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. Each of the transactions in the block youve only entered are now confirmed by the Bitcoin network and 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 system. But if you think about it, the mining part is just a by-product of this transaction confirmation process. So the name is a bit misleading, since the main goal 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 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 that you know what 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 way that the further mining energy the network gets, the harder it is to guess the answer to the mining math problem. So the difficulty of this mining method is really self-adjusting into the gathered mining capability the network owns. .
If more miners her response join, it will get harder to address the issue; if many of them drop off, it is going to get easier. This can be known as mining difficulty.
Now, rememberthis is on average. We can have two cubes being added 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 type of self-adjusting mechanism has created 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 reality, Satoshi, the inventor of Bitcoin, and his friend Hal Finney were a couple of the only individuals 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 issue was reduced. As Bitcoin started to catch on, people looked for more powerful mining solutions.