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But how can you create a system Which Has a decentralized ledger How do 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 this in a very creative manner I like to phone Who Wants to Be a Banker

In a nutshell, anyone who wants to take part in updating the ledger of Bitcoin transactions, known as the blockchain, can do so. Whatever you need is to guess a random number that solves an equation generated by the computer system. Sounds simple, right

 

 

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Of course, this guessing is all done by your PC. The more powerful your computer is, the more supposes you can create in one second, increasing your chances of winning this match. If you manage to figure 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 program determines which of these 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 generated, along with the solution, is sent to the entire network so other computers can affirm it. Its a bit similar to a Rubiks cube: The solution is very tough 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 you chose to include in the block.

4. The system generates a fixed amount of bitcoins (currently 12.5) and benefits them as compensation for the time and energy you spent solving the math issue.

 

 

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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 just entered are now confirmed by the Bitcoin network and are virtually irreversible.

 

 

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Therefore thats Bitcoin mining in a nutshell. Its called mining because of the fact that this procedure 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 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 type of guessing, for every block, a different miner will suppose the number and be granted the right to update the blockchain. Obviously, that the miners with more computing power will succeed more often, but due to 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 way that the further mining power the network has, the harder it is to guess the answer to the mining math problem. So the difficulty of the mining process is really self-adjusting into the gathered mining capability the network possesses. .

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

 

 

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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 difficulty is set so that, on average, a new block will be inserted 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 cubes being added 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 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 also his friend Hal Finney were a couple of the read review only individuals mining Bitcoin back in 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 low. Since Bitcoin started to catch on, folks looked for more potent mining solutions.

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