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But just how can you create a system that 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 work

Well, Bitcoins rulesalso known as the Bitcoin protocolsolves that in a Really creative way 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. All you need is to suppose a random number that solves an equation generated by the system. Sounds easy, right

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Of course, this guessing is done by your PC. The more powerful your computer is, the further guesses you can create in one 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 pc 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 your moment of glory, as youve now become 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 whole network so other computers can affirm it. Its somewhat similar to some Rubiks cube: The solution is quite hard to attain but quite easy to validate.

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

4. The system generates a fixed amount of bitcoins (currently 12.5) and benefits 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. Each of the transactions in the cube youve just entered are now confirmed by the Bitcoin network and therefore are virtually irreversible.

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Therefore thats Bitcoin mining in a nutshell. Its called mining because of the fact that this procedure helps mine new Bitcoins from the 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 form of guessing, for every block, a different miner will suppose the number and also be granted the right to upgrade the blockchain. Of course, that the miners with computing power will succeed More hints 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 manner that the further mining power the network has, the harder it is to imagine the answer to the mining mathematics issue. Therefore that the difficulty of this mining method is actually self-adjusting into the gathered mining power 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.

Well, he wanted to make 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 every ten minutes (i.e., the number is going to probably be figured every ten minutes on average). .

Now, remember, this is on average. We can have two blocks being added minute after minute and then wait find more an hour for 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 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 people mining Bitcoin back in 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 started to catch on, folks looked for more potent mining solutions.