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However, how can you create a system that 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 that in a very creative way I like to call Who Wants to Be a Banker

In a nutshell, anyone who wants to participate in updating the ledger of 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 system. Sounds easy, right

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Obviously, this guessing is all done by your computer. The stronger your computer is, the more supposes you can create in a second, increasing your chances of winning this match. If you manage to figure right, you earn bitcoins and have to write the next page of Bitcoin transactions on the blockchain. .

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1. Once your mining computer 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 the moment of glory, as youve now develop into 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 entire network so other computers can affirm it. Its somewhat much like some Rubiks cube: The solution is quite tough to attain but quite easy to validate.

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

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

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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 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 because of the fact that this process helps mine new Bitcoins from the system. But if you think about it, the mining component is just a by-product of the transaction confirmation process. Therefore the name is somewhat 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 form of guessing, for each block, a different miner will suppose the number and be granted the right to upgrade the blockchain. Obviously, that the miners with computing power will succeed more often, but on account of the law of statistical probability, its highly unlikely that the exact same miner will succeed each time. .

Now you know what Bitcoin mining is, you see page might be thinking, Cool! Free money! Where do I sign up Well, not so fast

Satoshi Nakamoto, who invented Bitcoin, crafted the principles for mining in a way that the further mining power the network has, the harder it is to imagine the answer to the mining math issue. So the difficulty of this mining method is actually self-adjusting to the accumulated mining power the network possesses. .

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

Well, he wanted our website to create a steady flow of new bitcoins into the 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 every ten minutes (i.e., the number is going to probably be guessed every ten minutes on average). .

Now, remember, this is on average. We can have two cubes being added minute after minute and then wait an hour for 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 created 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 lot of miners on the market. In reality, Satoshi, the inventor of Bitcoin, and 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. Since Bitcoin began to catch on, folks looked for more potent mining solutions.