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But just 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 this in a very creative manner I like to phone Who Wants to Be a Banker

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

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Obviously, this guessing is all done by your PC. The stronger your computer is, the further supposes 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 right suspect, your mining system 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 gets to update 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 similar to some Rubiks cube: The solution is quite tough to attain but very easy to validate.

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

4. The machine generates a predetermined amount of bitcoins (currently 12.5) and benefits them to you as compensation for the time and energy you spent solving the math problem.

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5. Additionally, you get paid any transaction fees which were attached 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 from the Bitcoin network and therefore are virtually irreversible.

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Therefore thats Bitcoin mining in a nutshell. Its called mining due to the fact that this process helps mine new Bitcoins from the system. But if you think about it, the mining part is just a by-product of this transaction confirmation process. So 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 be granted the right to update the blockchain. Obviously, that 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 more mining energy the network gets, the harder it is to imagine the answer to the mining mathematics problem. So the difficulty of the mining process is actually self-adjusting to the accumulated mining power the network possesses. .

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

Well, he wanted to make a steady stream 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 be figured each ten minutes on average). .

Now, rememberthis is on average. We can have two blocks being added 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 kind of self-adjusting mechanism has made a type 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 great deal of miners out there. In reality, Satoshi, the inventor of Bitcoin, and his friend Hal Finney were a couple of 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 reduced. Since Bitcoin began to catch her latest blog on, folks looked for more potent mining solutions.