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However, just 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 job

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 Bitcoin transactions, known as the blockchain, can do so. Whatever you need is to suppose 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 PC. The stronger your computer is, the more guesses you can create 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 pc comes up with the right guess, your mining system determines which of these current pending transactions will be grouped together into the next block of transactions. Compiling this cube represents the 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 generated, along with your solution, is sent to the entire network so other computers can validate it. Its somewhat much like a Rubiks cube: The solution is very tough to attain but quite easy to validate.

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

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

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5. Additionally, you get paid any transaction fees that helpful resources 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 are virtually irreversible.

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So thats Bitcoin mining in a nutshell. Its called mining due to 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 procedure. Therefore the name is somewhat 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 each block, a different miner will guess the number and be granted the right to upgrade the blockchain. Of course, the miners with more computing power will succeed more often, but on account of 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 manner that the further mining power the network gets, the harder it is to imagine the answer to the mining math problem. Therefore the difficulty of the mining method is really self-adjusting to the gathered mining power the network possesses. .

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

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 difficulty is set so that, on average, a new block will be inserted each ten minutes (i.e., the number is going to be guessed each ten minutes on average). .

Now, rememberthis 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 will 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 powerful miners as soon as possible.

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When Bitcoin first started out, there werent a lot of miners out there. In fact, Satoshi, the inventor of Bitcoin, and also his friend Hal Finney were a couple of the only individuals 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 issue was low. As Bitcoin started to catch on, folks looked for more powerful mining solutions.