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However, just how can 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 work

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

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Obviously, this guessing is done by your computer. The more powerful your computer is, the more supposes you can make in a second, increasing your chances of winning this match. If you manage to guess right, you earn bitcoins and get 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 guess, 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 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 your solution, is sent to the whole network so other computers can validate it. Its a bit similar to some Rubiks cube: The solution is quite hard to achieve but very easy to validate.

3. Every computer which validates your solution updates its copy of the Bitcoin transaction ledger with the transactions that you chose to include in the cube.

4. The machine 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 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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So thats Bitcoin mining in a nutshell. Its called mining due to 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 the transaction confirmation process. Therefore that the name is a bit misleading, since the main goal of mining would be to maintain the ledger in a decentralized manner. .

As you can imagine, since mining is based on a type of guessing, for each block, a different miner will guess the number and be granted the right to upgrade the blockchain. Obviously, the miners with computing power will succeed more often, but on account of the regulation of statistical probability, its highly unlikely that the same miner will succeed every time. .

Now 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 energy the network has, the harder it is to imagine the answer to the mining mathematics problem. So the difficulty of the mining process is really self-adjusting into the accumulated mining power the network possesses. .

If more miners join, it is going to get more difficult to address the problem; when many of them drop off, it is going to get easier. This is known as mining difficulty.

He wanted to make a steady flow 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 each ten minutes (i.e., the number is going to probably be guessed every ten minutes on average). .

Now, rememberthis is on average. We can have two cubes 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 created a type of this hyperlink 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 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 issue was low. Since Bitcoin started to catch on, people looked for more powerful mining solutions.