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But 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 a lot of 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 love to phone Who Wants to Be a Banker

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

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Of course, this guessing is done by your PC. The more powerful your computer is, the further guesses you can create in one second, increasing your chances of winning this match. If you manage to guess correctly, 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 the current pending transactions will be grouped together into the next block of transactions. Compiling this block represents your moment of glory, as youve now become a temporary banker of Bitcoin who has to update the Bitcoin transaction ledger known as the blockchain. .

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

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

4. The system generates a fixed amount of bitcoins (currently 12.5) and rewards 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 that 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 from the Bitcoin network and therefore are virtually irreversible.

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So thats Bitcoin mining in a nutshell. Its called mining because of the fact that this process helps mine new Bitcoins from the system. But if you think about it, the mining part is merely a by-product of the transaction confirmation procedure. So that 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 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 law of statistical probability, its highly unlikely that the exact 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 visit here Well, not so fast

Satoshi Nakamoto, who invented Bitcoin, crafted the principles for mining in a manner that the further mining energy the network has, the harder it is to guess the answer to the mining mathematics problem. So that the difficulty of the mining method is actually self-adjusting to the accumulated mining capability the network possesses. .

If more miners join, it is going to get harder to address the issue; if 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 inserted each ten minutes (i.e., the number is going to probably be figured each ten minutes on average). .

Now, remember, this is on average. We can have two cubes being inserted 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 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 click for more out there. In reality, Satoshi, the inventor of Bitcoin, and his friend Hal Finney were a couple of 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 began to catch on, folks looked for more potent mining solutions.