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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 a lot of powerin case they become corrupt or negligent in their work

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

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

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Obviously, this guessing is all done by your computer. The more powerful your computer is, the more guesses you can make in a second, increasing your chances of winning this game. 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 suspect, your mining program determines which of the current pending transactions will be grouped together into the next block of transactions. Compiling this block 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 your solution, is sent to the whole network so other computers can validate it. Its a bit much like a Rubiks cube: The solution is quite tough to achieve but very easy to validate.

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

4. The system generates a fixed amount of bitcoins (currently 12.5) and rewards them 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 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 by the Bitcoin network and are virtually irreversible.

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Therefore 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 this read this post here transaction confirmation process. So that the name is a bit misleading, since the main objective 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 every block, a different miner will suppose the number and be granted the right to update the blockchain. Obviously, that the miners with 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 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 principles for mining in a way that the more mining power the network gets, the harder it is to guess the answer to the mining math problem. So that the difficulty of this mining method is really self-adjusting into the gathered mining capability the network owns. .

If more miners join, it will get more difficult to address the problem; if many of them fall 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 inserted every ten minutes (i.e., the number is going to probably be figured each ten minutes on average). .

Now, rememberthis 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 may 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 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 fact, Satoshi, the inventor of Bitcoin, and also his friend Hal Finney were a few the only people mining Bitcoin back at the time with 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 difficulty was reduced. Since Bitcoin started to catch on, people looked for more powerful mining solutions.