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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 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 manner I like to call Who Wants to Be a Banker

In a nutshell, anyone who wants to participate in updating the ledger of Bitcoin transactions, known as the blockchain, can do this. All you need is to guess a random number that solves an equation generated by the system. Sounds easy, right

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Obviously, this guessing is all done by your PC. The more powerful your computer is, the further guesses you can make in one second, increasing your chances of winning this match. 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 computer comes up with the ideal suspect, 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 has to upgrade 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 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 upgrades its copy of the Bitcoin transaction ledger together with the transactions that you chose to include in the block.

4. The machine generates a predetermined 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. Each of 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 simple fact that this process helps mine new Bitcoins from the system. But if you think about it, the mining component is just a by-product of the transaction confirmation procedure. So 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 every block, a different miner will guess the number and be granted the right to upgrade the blockchain. Obviously, that the miners with computing power will succeed more often, but on account of the regulation of statistical probability, its highly unlikely that the exact same miner will succeed every time. .

Now 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 rules for mining in a manner that the more mining energy the network gets, the harder it find out this here is to imagine the answer to the mining mathematics issue. So the difficulty of the mining process is really self-adjusting into the gathered mining capability the network possesses. .

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

Well, he wanted to create a steady flow of new bitcoins into the computer system. In a sense, this has been done to keep inflation in check. Mining difficulty is set so that, on average, a new block will be added each ten minutes (i.e., the number is going to 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 to 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 created a sort 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 on the market. In reality, Satoshi, the inventor of Bitcoin, and also his friend Hal Finney were a few the only individuals mining Bitcoin back at 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 low. As Bitcoin began to catch on, people looked for more potent mining solutions.