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But just how do you create a system Which 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 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 a nutshell, anyone who wants to participate in updating the ledger of Bitcoin transactions, known as the blockchain, can do so. All you need is to suppose a random number that solves an equation generated by the computer system. Sounds simple, right

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Of course, this guessing is all done by your computer. 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 suspect, your mining program 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 gets to update the Bitcoin transaction ledger known as the blockchain. .

2. The block youve generated, along with the solution, is sent to the whole network so other computers can validate it. Its somewhat similar to some Rubiks cube: The solution is very tough to achieve but very easy to validate.

3. Every computer that validates your solution upgrades its copy of the Bitcoin transaction ledger with the transactions you opted to include in the block.

4. The machine 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. All the transactions in the block youve only entered are now confirmed by the Bitcoin network and 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 computer system. But if you think about it, the mining component is merely a by-product of this transaction confirmation procedure. Therefore 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 form of guessing, for each block, a different miner will suppose the number and be granted the right to upgrade the blockchain. Of course, the miners with 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 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 way that the more mining energy the network has, the harder it is to imagine the answer to the mining math issue. Therefore the difficulty of the mining method is actually self-adjusting to the accumulated mining power the network possesses. .

If more miners join, it click here for more will get harder to address the issue; when many of them fall off, it will get easier. This is known as mining issue.

He wanted to make 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 inserted each ten minutes (i.e., the number will be figured 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 for the next block. In the long run, this will 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 powerful miners as soon as possible.

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When Bitcoin first started out, there werent a lot of miners on the market. In fact, Satoshi, the inventor of Bitcoin, and his friend Hal Finney were a few the only people 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 low. As Bitcoin began to catch on, folks looked for more powerful mining solutions.