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However, just how can you create a system that 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 this in a Really creative manner I like to call 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 this. Whatever 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 computer. The more powerful your computer is, the more guesses you can create in a second, increasing your chances of winning this match. If you manage to guess right, you earn bitcoins and have to write the next page of Bitcoin transactions on the blockchain. .

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1. Once your mining pc comes up with the ideal guess, your mining system 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 become a temporary banker of Bitcoin who gets to update the Bitcoin transaction ledger known as the blockchain. .

2. The block youve generated, along with your solution, is sent to the whole network so other computers can affirm it. Its somewhat much like some 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 the Bitcoin transaction ledger together with the transactions that you chose to include in the cube.

4. The system generates a fixed amount of bitcoins (currently 12.5) and benefits them to you 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. Each of the transactions in the cube youve just entered are now confirmed by 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 computer system. But if you think about it, the mining part is merely a by-product of the transaction confirmation process. So that the name is a bit misleading, since the main objective of mining would be 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 update the blockchain. Of course, that the miners with more computing power will succeed right here more often, but on account of the law of statistical probability, its highly unlikely that the same miner will succeed every time. .

Now that you know what Bitcoin mining is, you may be thinking, Cool! Free money! Where do I sign up Well, you could try this out not so fast

Satoshi Nakamoto, who invented Bitcoin, crafted the rules for mining in a manner that the further mining power the network has, the harder it is to imagine the answer to the mining mathematics problem. So the difficulty of this mining method is actually self-adjusting to the gathered mining power the network possesses. .

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

He site wanted to create a steady stream of new bitcoins into the system. In a sense, this has been done to keep inflation in check. Mining issue is set so that, on average, a new block will be added every ten minutes (i.e., the number is going to probably be figured 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 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 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 difficulty was low. As Bitcoin started to catch on, folks looked for more potent mining solutions.