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But how do 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 this in a very creative manner I like to call Who Wants to Be a Banker
In a nutshell, anyone who wants to take part in updating the ledger of 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 system. Sounds simple, right
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Of course, this guessing is all done by your computer. The stronger your computer is, the more guesses you can make in one second, increasing your chances of winning this match. If you manage to figure correctly, you earn bitcoins and get 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 program determines which of these current pending transactions will be grouped together into the next block of transactions. Compiling this cube represents the moment of glory, as youve now become a temporary banker of Bitcoin who has to upgrade 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 affirm it. Its somewhat similar to some Rubiks cube: The solution is very hard to achieve but very easy to validate.
3. Every computer which validates your solution upgrades its copy of this 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 to you as compensation for time and energy you spent solving the math issue.
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5. Additionally, you get paid any transaction fees that were attached these details to the transactions you inserted into the next block.
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6. All the transactions in the cube youve only entered are now confirmed by the Bitcoin network and are virtually irreversible.
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Therefore 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 component is merely a by-product of this transaction confirmation procedure. Therefore that the name is a bit 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 form of guessing, for each block, a different miner will guess 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 each 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 manner that the further mining power the network gets, the harder it is to guess the answer to the mining math problem. So the difficulty of the mining process is actually self-adjusting into the accumulated mining capability the network possesses. .
If more miners join, it is going to get more difficult to address the problem; if many of them fall off, it is going to get easier. This can be known as mining issue.
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 may even out to ten minutes on average.
As you can imagine, this type of self-adjusting mechanism has made a sort of arms race to get the most efficient and strong 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 few 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 reduced. Since Bitcoin started to catch on, folks looked for more potent mining solutions.