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However, just how do you create a system Which Has a decentralized ledger How do you give someone the ability to upgrade 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 very creative manner I love to phone 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. Whatever you need is to guess a random number that solves an equation generated by the computer system. Sounds easy, right
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Obviously, this guessing is done by your computer. The stronger your computer is, the further guesses you can make in one 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 guess, your mining program 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 gets to update the Bitcoin transaction ledger known as the blockchain. .
2. The block youve generated, along with the solution, is sent to the entire network so other computers can validate it. Its a bit similar to a Rubiks cube: The solution is very hard to achieve but very easy to validate.
3. Each computer that validates your solution updates its copy of the Bitcoin transaction ledger together with the transactions you chose to include in the block.
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 problem.
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5. Additionally, you get paid any transaction fees that were attached to the transactions you inserted into the next block.
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6. All the transactions in the cube youve only entered are now confirmed from the Bitcoin network and therefore are virtually irreversible.
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So thats Bitcoin mining in a nutshell. Its called mining due to 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 the transaction confirmation procedure. So 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 type of guessing, for every block, a different miner will guess the number and be granted the right to update the blockchain. Obviously, that the miners with more computing power will succeed more often, but on account of 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 principles for mining in a way that the more mining power the network gets, the harder it is to guess the answer to the mining math problem. Therefore that the difficulty of the mining method is really self-adjusting into the accumulated mining capability the network owns. .
If more miners join, it is going to get harder to solve the issue; when many of them fall off, it will get easier. This is known as mining difficulty.
Now, remember, this is on average. We can have two cubes 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 kind of self-adjusting mechanism has created a sort 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. company website In fact, Satoshi, the inventor of Bitcoin, and also his friend Hal Finney were a few the only individuals 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 difficulty was reduced. Since Bitcoin began to catch on, folks looked for more potent mining solutions.