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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 upgrade the ledger without giving them a lot of powerin case they become corrupt or negligent in their job

Well, Bitcoins rulesalso known as the Bitcoin protocolsolves that in a Really creative manner I like to phone Who Wants to Be a Banker

In short, anyone who wants to take part 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 system. Sounds easy, right

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Obviously, this guessing is done by your PC. The stronger your computer is, the further supposes you can make in a second, increasing your chances of winning this game. If you manage to guess 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 right suspect, your mining system 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 become a temporary banker of Bitcoin who has to upgrade the Bitcoin transaction ledger known as the blockchain. .

2. The block youve created, along with your solution, is sent to the entire network so other computers can validate it. Its a bit similar to some Rubiks cube: The solution is very tough to achieve but quite easy to validate.

3. Each computer which validates your solution upgrades its copy of this 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 benefits them as compensation for 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 block youve only entered are now confirmed by the Bitcoin network and are virtually irreversible.

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So thats Bitcoin mining in a nutshell. Its called mining because of the simple 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 the transaction confirmation process. Therefore that the name is somewhat misleading, since the main objective 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 every block, a different miner will suppose 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 regulation of statistical probability, its highly unlikely that the same miner will succeed every time. .

Now 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 power the network has, the harder it is to imagine the answer to the mining math problem. So the difficulty of the mining method is actually self-adjusting into the accumulated mining power the network possesses. .

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

He wanted to create a steady flow of new bitcoins into the computer system. In a check it out sense, this was done to keep inflation in check. Mining difficulty is set so that, on average, a new block will be added each ten minutes (i.e., the number is going to be guessed each ten minutes on average). .

Now, remember, this is on average. We can have two blocks being inserted minute after minute and then wait an hour for the next block. In the long run, this may 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 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 out there. In reality, Satoshi, the inventor of Bitcoin, and his friend Hal Finney were a couple of 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, folks looked for more powerful mining solutions.