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But 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 this in a very creative manner I love to phone 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 so. 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 PC. The stronger your computer is, the more guesses you can create in a second, increasing your chances of winning this match. If you manage to figure 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 computer comes up with the right guess, 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 upgrade the Bitcoin transaction ledger known as the blockchain. .

2. The block youve generated, along with your solution, is sent to the entire network so other computers can affirm it. Its somewhat much like a Rubiks cube: The solution is very hard to attain but very easy to validate.

3. Every computer which validates your solution upgrades its copy of this Bitcoin transaction ledger with the transactions that you opted 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 issue.

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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. All the transactions in the cube youve only 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 fact that this procedure helps mine new Bitcoins from the computer system. But if you think about it, the mining component is merely a by-product of this transaction confirmation process. So that the name is a bit misleading, since the main objective of mining is to maintain the ledger in a decentralized manner. .

As you her explanation can imagine, since mining is based on a type of guessing, for each block, a different miner will guess the number and also be granted the right to upgrade the blockchain. Of course, that the miners with computing power will succeed more often, but due to the law of statistical probability, its highly unlikely that find out here now the exact 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, not so fast

Satoshi Nakamoto, who invented Bitcoin, crafted the rules for mining in a manner that the more mining power the network gets, the harder it is to imagine the answer to the mining mathematics problem. Therefore the difficulty of this mining method is really self-adjusting to see post the gathered mining capability the network possesses. .

If more miners join, it will get harder to address the issue; when many of them drop off, it will get easier. This can be known as mining difficulty.

Well, he wanted to create 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 added every ten minutes (i.e., the number will probably be guessed each ten minutes on average). .

Now, rememberthis is on average. We can have two blocks being added minute after minute and then wait an hour to the next block. In the long run, this will even out to ten minutes on average.

As you can imagine, this type of self-adjusting mechanism has made 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 great deal of miners on the market. In fact, Satoshi, the inventor of Bitcoin, and his friend Hal Finney were a few the only individuals 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 computer) was enough for mining Bitcoin back in 2009, since mining difficulty was low. As Bitcoin began to catch on, folks looked for more powerful mining solutions.