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However, just how do you create a system that 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 work

Well, Bitcoins rulesalso known as the Bitcoin protocolsolves this in a Really creative manner I love 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. All you need is to guess a random number that solves an equation generated by the computer system. Sounds easy, right

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Of course, this guessing is done by your computer. The more powerful your computer is, the more supposes you can create in a 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 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 block represents your moment of glory, as youve now develop into a temporary banker of Bitcoin who has 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 much like some Rubiks cube: The solution is very hard to achieve but very easy to validate.

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

4. The machine generates a fixed amount of bitcoins (currently 12.5) and rewards 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. Each of the transactions in the block youve only entered are now confirmed from the Bitcoin network and therefore are virtually irreversible.

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So thats Bitcoin mining in a nutshell. Its called mining because of the simple fact that this procedure helps mine new Bitcoins from the system. But if you think about it, the mining part is just a by-product of the transaction confirmation process. Therefore that the name is somewhat 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 suppose the number and be granted the right to upgrade the blockchain. Of course, that the miners with more computing power will succeed more often, but due to the regulation of statistical probability, its highly unlikely that the exact 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 way that the more mining power the network gets, the harder it is to guess the answer to the mining mathematics problem. Therefore that the difficulty of the mining method is really self-adjusting into the accumulated mining capability the network owns. .

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.

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Well, he wanted to create a steady flow of new bitcoins into the computer system. In a sense, this was 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 will be guessed every ten minutes on average). .

Now, rememberthis is on average. We can have two cubes More hints being added 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 acquire 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 people 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 reduced. As Bitcoin began to catch on, folks looked for more potent mining solutions.

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