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However, just 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 work

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 a nutshell, anyone who wants to participate in updating the ledger of all Bitcoin transactions, known as the blockchain, can do so. Whatever you need is to suppose a random number that solves an equation generated by the computer system. Sounds simple, right

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Of course, this guessing is all done by your computer. The stronger your computer is, the further supposes you can make in one second, increasing your chances of winning this match. If you manage to guess right, you earn bitcoins and have to write the next page of Bitcoin transactions on the blockchain. .

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1. Once your mining computer comes up with the ideal suspect, your mining program determines which of the 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 has 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 validate it. Its somewhat similar to a Rubiks cube: The solution is quite hard to achieve but quite easy to validate.

3. Each computer that validates your solution updates its copy of this Bitcoin transaction ledger with the transactions that you chose to include in the cube.

4. The machine generates a predetermined amount of bitcoins (currently 12.5) and benefits them to you 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 that were attached to the transactions you inserted into the next block.

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6. All the transactions in the block youve only 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 because of the simple fact that this process helps mine new Bitcoins from the computer system. But if internet you think about it, the mining part is just 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 every block, a different miner will guess the number and be granted the right to upgrade the blockchain. Of course, that the miners with more computing power will succeed more often, but on account of the regulation 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 principles for mining in a way that the further mining power the network gets, the harder it is to imagine the answer to the mining mathematics issue. Therefore that the difficulty of this mining method is actually self-adjusting into the gathered mining power the network possesses. .

If Get the facts more miners join, it will get more difficult to address the issue; when many of them fall off, it is going to get easier. This can be known as mining issue.

Well, he wanted to make a steady flow of new bitcoins into the computer system. In a sense, this was done to keep inflation in check. Mining difficulty is set so that, on average, a new block will be inserted every ten minutes (i.e., the number is going to be figured each ten minutes on average). .

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 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 on the market. In reality, Satoshi, the inventor of Bitcoin, and his friend Hal Finney were a couple of the only people 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 difficulty was reduced. Since Bitcoin began to catch on, people looked for more powerful mining solutions.