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But how can 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 job

Well, Bitcoins rulesalso known as the Bitcoin protocolsolves that in a Really creative manner I love to phone Who Wants to Be a Banker

In short, anyone who wants to take part in updating the ledger of 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 simple, right

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Obviously, this guessing is all 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 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 suspect, your mining program 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 develop into a temporary banker of Bitcoin who has to upgrade 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 somewhat much like some Rubiks cube: The solution is very tough to achieve but very easy to validate.

3. Each computer that validates your solution upgrades its copy of this Bitcoin transaction ledger together with the transactions you chose to include in the cube.

4. The machine generates a predetermined amount of bitcoins (currently 12.5) and benefits 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. All the transactions in the block youve only entered are now confirmed from the Bitcoin network and are virtually irreversible.

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Therefore thats Bitcoin mining in a nutshell. Its called mining because of the simple fact that this procedure helps mine new Bitcoins from the system. But if you think about it, the mining component is just a by-product of the transaction confirmation process. So that the name is somewhat misleading, since the main objective 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 guess the number and be granted the right to update the blockchain. Obviously, 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 that you know what Bitcoin mining is, you might 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 energy the network gets, the harder it is to imagine the answer to the mining mathematics problem. So that the difficulty of this mining method is really self-adjusting into the gathered mining power the network possesses. .

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

He wanted to create a steady flow of new bitcoins into the system. In a sense, this has been done to keep inflation in check. Mining difficulty is set so that, on average, a new block will be added each ten minutes (i.e., the number is going to probably be guessed each ten minutes on average). .

Now, rememberthis is on average. We can have two cubes 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 type of arms race to acquire the most efficient and powerful miners as soon as possible.

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When Bitcoin first started out, there werent a lot of miners out there. In fact, Satoshi, the inventor of Bitcoin, and his friend Hal Finney were a couple of the only individuals mining Bitcoin back at the time with view website 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 reduced. Since Bitcoin started to catch on, people looked for more potent mining solutions.