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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 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 very creative way I love to call Who Wants to Be a Banker

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

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Obviously, this guessing is done by your computer. The more powerful your computer is, the further guesses you can make in one second, increasing your chances of winning this match. If you manage to figure 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 pc comes up with the ideal suspect, your mining system determines which of the current pending transactions will be grouped together into the next block of transactions. Compiling this cube represents your 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 created, along with the solution, is sent to the whole network so other computers can affirm it. Its a bit similar to some Rubiks cube: The solution is very tough to attain but quite easy to validate.

3. Every computer that validates your solution upgrades its copy of the Bitcoin transaction ledger together with the transactions 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. All the transactions in the block youve just 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 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 procedure. So 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 every block, a different miner will suppose the number and also be granted the right to upgrade the blockchain. Obviously, the miners with computing power will succeed more often, but on account of the law of statistical probability, its highly unlikely that the same miner will succeed see page 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 manner that the further mining power the network has, the harder it is to imagine the answer to the mining math problem. Therefore the difficulty of the mining process is really self-adjusting into the gathered mining power the network owns. .

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

Well, he wanted to make a steady stream of new bitcoins into the computer system. In a sense, this has been done to keep inflation in check. Mining issue is set so that, on average, a new block will be added every ten minutes (i.e., the number is going to be guessed every ten minutes on average). .

Now, rememberthis 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 will even out to ten minutes on average.

As you can imagine, this type of self-adjusting mechanism has made a type 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 out there. In fact, Satoshi, the inventor of Bitcoin, and also his friend Hal Finney were a couple of 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 issue was low. Since Bitcoin began to catch on, people looked for more potent mining solutions.