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But 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 work

Well, Bitcoins rulesalso known as the Bitcoin protocolsolves this in a very creative manner I love to phone Who Wants to Be a Banker

In a nutshell, anyone who wants to take part 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 computer system. Sounds simple, right

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Obviously, this guessing is all done by your computer. The more powerful your computer is, the further supposes you can create in a second, increasing your chances of winning this match. If you manage to figure correctly, 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 right suspect, your mining program 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 gets to update the Bitcoin transaction ledger known as the blockchain. .

2. The block youve created, along with your solution, is sent to the whole network so other computers can affirm it. Its a bit much like a Rubiks cube: The solution is quite tough to attain but quite easy to validate.

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

4. The machine 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 cube youve just entered are now confirmed by the Bitcoin network and therefore 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 merely a by-product of this transaction confirmation process. So 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 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 due to the regulation of statistical probability, its highly unlikely that the exact same miner will succeed every time. .

Now that 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 further mining power the network has, the harder it is to guess the answer to the mining math issue. So the difficulty of this mining method is really self-adjusting to the gathered mining capability the network possesses. .

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

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He wanted to make a steady stream of new bitcoins into the system. In a sense, this has been 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 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 kind of self-adjusting mechanism has made a type of arms race to acquire the most efficient and strong miners as soon as possible.

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When Bitcoin first my site 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 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 difficulty was low. As Bitcoin started to catch on, folks looked for more powerful mining solutions.

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