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However, how can you create a system that has a decentralized ledger How can 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. 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 done by your computer. The more powerful your computer is, the further guesses you can make 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 develop into a temporary banker of Bitcoin who gets to update 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 validate it. Its a bit similar to a Rubiks cube: The solution is quite hard to attain but quite easy to validate.

3. Each computer that validates your solution updates its copy of the 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 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 block youve only entered are now confirmed from the Bitcoin network and therefore are why not find out more virtually irreversible.

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Therefore thats Bitcoin mining in a nutshell. Its called mining due to the simple fact that this procedure helps mine new Bitcoins from the computer system. But if you think about it, the mining component is just a by-product of the transaction confirmation process. Therefore that the name is a bit misleading, since the my company 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 suppose the number and be granted the right to update the blockchain. Of course, 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 each 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 principles for mining in a way that the more mining energy the network gets, the harder it is to imagine the answer to the mining mathematics problem. Therefore the difficulty of the mining process is actually self-adjusting to the gathered mining power the network owns. .

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

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 added every ten minutes (i.e., the number will be guessed each 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 type 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 couple of the only individuals mining Bitcoin back in 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 reduced. Since Bitcoin started to catch on, folks looked for more potent mining solutions.