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But just how do you create a system that 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 short, anyone who wants to take part in updating the ledger of all Bitcoin transactions, known as the blockchain, can do this. All 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 done by your computer. The more powerful your computer is, the more guesses you can make in one second, increasing your chances of winning this match. If you manage to guess 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 system 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 develop into a temporary banker of Bitcoin who has to update the Bitcoin transaction ledger known as the blockchain. .

2. The block youve generated, along with the solution, is sent to the whole network so other computers can affirm it. Its somewhat similar to a 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 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 the time and energy you spent solving the math problem.

 

 

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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 block 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 procedure helps mine new Bitcoins from the computer system. But if you think about it, the mining part is merely a by-product of the transaction confirmation procedure. Therefore that the name is somewhat 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 each block, a different miner will suppose the number and 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 regulation of statistical probability, its highly unlikely that the same miner will succeed each 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 further mining power the network gets, the harder it is to guess the answer to the mining mathematics issue. So the difficulty of this mining process is really self-adjusting into the gathered mining power the network possesses. .

If more miners join, it is going to get harder to address the issue; when many of them drop off, it is going to get easier. This can be known as mining difficulty.

 

 

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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 each ten minutes (i.e., the number will be figured each ten minutes on average). .

Now, rememberthis is on average. We can have two blocks being added minute after minute and then wait an hour for 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 made a type of arms race to get the most efficient and powerful 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 advice 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 issue was reduced. As Bitcoin started to catch on, people looked for more powerful mining solutions.

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