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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 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 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. 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 PC. The more powerful your computer is, the more supposes you can make in one second, increasing your chances of winning this match. If you manage to figure 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 computer comes up with the right suspect, your mining program determines which of the current pending transactions will be grouped together into the next block of transactions. Compiling this block represents your moment of glory, as youve now become a temporary banker of Bitcoin who has to upgrade 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 much like some Rubiks cube: The solution is quite hard to attain but quite easy to validate.
3. Each computer that validates your solution updates its copy of the Bitcoin transaction ledger together with the transactions that you chose to include in the block.
4. The machine 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 therefore are virtually irreversible.
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So 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 component is merely a by-product of this transaction confirmation process. Therefore the name is somewhat 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 form of guessing, for each block, a different miner will guess the number and be granted the right to update the blockchain. Of course, 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 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 more mining power the network gets, the harder it is to imagine the answer to the mining math problem. Therefore that the difficulty of this mining process is actually self-adjusting into the gathered mining power the network possesses. .
If more miners join, it is going to 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, remember, this 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 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 on the market. In reality, Satoshi, the inventor of Bitcoin, and also his friend Hal Finney were a couple of the official website 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 computer) was enough for mining Bitcoin back in 2009, since mining issue was reduced. Since Bitcoin began to catch on, folks looked for more powerful mining solutions.