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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 job
Well, Bitcoins rulesalso known as the Bitcoin protocolsolves that in a very creative way I love to call Who Wants to Be a Banker
In short, anyone who wants to participate in updating the ledger of 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 easy, right
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Of course, this guessing is all done by your PC. The stronger your computer is, the more guesses you can create 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 the moment of glory, as youve now become a temporary banker of Bitcoin who gets to update 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 a bit similar to some Rubiks cube: The solution is very tough to achieve but very easy to validate.
3. Each computer which validates your solution upgrades its copy of the Bitcoin transaction ledger with the transactions you chose to include in the cube.
4. The system generates a fixed amount of bitcoins (currently 12.5) and rewards them to you as compensation for 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 are virtually irreversible.
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Therefore thats Bitcoin mining in a nutshell. Its called mining due to the fact that this process helps mine new Bitcoins from the computer system. But if you think about it, the mining component is just a by-product of the transaction confirmation process. Therefore that the name is a bit misleading, since the main goal of mining is 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 guess the number and also be granted the right to upgrade the blockchain. Of course, that the miners with 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 principles for mining in a way that the more mining energy the network gets, the harder it is to guess the answer to the mining mathematics problem. So that the difficulty of the mining method is really self-adjusting to the gathered mining power the network owns. .
If more miners join, it is going to get harder to solve the issue; when many of them drop off, it will get easier. This can be known as mining issue.
Now, remember, this is on average. We can have two blocks being added 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 kind of self-adjusting mechanism has created a sort 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 reality, Satoshi, the inventor of Bitcoin, and also his friend Hal Finney were a few 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 article 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.