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But how do 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 work

Well, Bitcoins rulesalso known as the Bitcoin protocolsolves that in a very creative way I like to phone Who Wants to Be a Banker

In short, anyone who wants to participate in updating the ledger of 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 computer. The stronger your computer is, the more supposes you can create in one second, increasing your chances of winning this game. If you manage to guess 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 system determines which of these current pending transactions will be grouped together into the next block of transactions. Compiling this block represents the moment of glory, as youve now become a temporary banker of Bitcoin who has to update the Bitcoin transaction ledger known as the blockchain. .

2. The block youve created, 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 very hard to achieve 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 block.

4. The system generates a predetermined amount of bitcoins (currently 12.5) and rewards them as compensation for 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. Each of the transactions in the cube youve only entered are now confirmed from the Bitcoin network and are virtually irreversible.

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So thats Bitcoin mining in a nutshell. Its called mining due to the simple 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 procedure. Therefore that the name is somewhat misleading, since the main goal of mining is 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 suppose the number and also be granted the right to upgrade the blockchain. Obviously, the miners with more computing power will succeed more often, but due to the law 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 manner that the her comment is here further mining power the network has, the harder it is to imagine the answer to the mining math problem. So the difficulty of the mining process is actually self-adjusting into the gathered mining capability the network possesses. .

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

He wanted to make a steady flow 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 is going to be figured every ten minutes on average). .

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 will even out to ten minutes on average.

As you can anonymous imagine, this kind of self-adjusting mechanism has created 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 lot of miners out there. In fact, Satoshi, the inventor of Bitcoin, and also his friend Hal Finney were a couple of the only individuals mining Bitcoin back in the time using 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 started to catch on, people looked for more potent mining solutions.