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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 too much powerin case they become corrupt or negligent in their work

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

In short, anyone who wants to take part in updating the ledger of Bitcoin transactions, known as the blockchain, can do this. Whatever you need is to guess a random number that solves an equation generated by the system. Sounds simple, 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 a second, increasing your chances of winning this game. 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 guess, your mining program determines which of the current pending transactions will be grouped together into the next block of transactions. Compiling this block represents the moment of glory, as youve now develop into a temporary banker of Bitcoin who gets to upgrade the Bitcoin transaction ledger known as the blockchain. .

2. The block youve created, along with the solution, is sent to the entire network so other computers can affirm it. Its somewhat similar to a Rubiks cube: The solution is very tough to achieve but very easy to validate.

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

4. The machine generates a predetermined amount of bitcoins (currently 12.5) and benefits 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. 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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Therefore 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 the transaction confirmation process. Therefore the name is a bit 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 also be granted the right to upgrade the blockchain. Of course, the miners with more computing power will succeed more often, but due to 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 has, the harder it is to imagine the answer to the mining math problem. Therefore the difficulty of the mining process is really self-adjusting into the accumulated mining power the network owns. . advice

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

Well, 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 issue is set so that, on average, a new block will be added each ten minutes (i.e., the number is going to be guessed each ten minutes on average). .

Now, rememberthis 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 kind of self-adjusting mechanism has created a type of arms race to acquire 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 reality, Satoshi, the inventor of Bitcoin, and also 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 Source computer) was enough for mining Bitcoin back in 2009, since mining issue was reduced. Since Bitcoin began to catch on, folks looked for more potent mining solutions.