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But just how can you create a system Which Has a decentralized ledger How can you give someone the ability to upgrade the ledger without giving them a lot of powerin case they become corrupt or negligent in their job

Well, Bitcoins rulesalso known as the Bitcoin protocolsolves this in a very creative way I love to call Who Wants to Be a Banker

In a nutshell, 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 suppose a random number that solves an equation generated by the computer system. Sounds easy, 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 create in a second, increasing your chances of winning this game. If you manage to figure correctly, you earn bitcoins and have to write the next page of Bitcoin transactions on the blockchain. .

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1. Once your mining pc comes up with the ideal guess, your mining system 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 become 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 entire network so other computers can affirm it. Its somewhat much like some Rubiks cube: The solution is quite hard to attain but very easy to validate.

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

4. The system generates a fixed amount of bitcoins (currently 12.5) and rewards them as compensation for 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 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 because of the fact that this process helps mine new Bitcoins from the computer system. But if you think about it, the mining part is just a by-product of this transaction confirmation procedure. Therefore the name is somewhat 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 each block, a different miner will guess the number and be granted the right to update the blockchain. Obviously, the miners with computing power will succeed more additional reading 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 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 manner that the further mining energy the network gets, the harder it is to guess the answer to the mining mathematics problem. Therefore the difficulty of this mining process is really self-adjusting into the gathered mining capability the network possesses. .

If more miners join, it is going to get more difficult to solve the problem; if many of them fall off, it will get easier. This is known as mining issue.

He wanted to make a steady stream of new bitcoins into the 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 will probably be guessed every 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 linked here 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 strong miners as soon as possible.

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When Bitcoin first started out, there werent a great deal of miners out there. In fact, Satoshi, the inventor of Bitcoin, and 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 computer) was enough for mining Bitcoin back in 2009, since mining difficulty was low. As Bitcoin started to catch on, folks looked for more potent mining solutions.