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However, how can you create a system that has a decentralized ledger How can you give someone the ability to update 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 this in a very creative manner I love to phone 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. All you need is to guess a random number that solves an equation generated by the computer system. Sounds simple, right

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Of course, this guessing is done by your PC. The more powerful your computer is, the more supposes you can create in one 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 ideal 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 become a temporary banker of Bitcoin who gets 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 similar to some Rubiks cube: The solution is quite tough to attain but very easy to validate.

3. Every computer which validates your solution updates its copy of the Bitcoin transaction ledger with the transactions you chose to include in the block.

4. The system generates a predetermined amount of bitcoins (currently 12.5) and benefits 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 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 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 part is just a by-product of this transaction confirmation procedure. So the name is somewhat misleading, since the main objective of mining is to maintain the ledger in a Continued decentralized manner. .

As you can imagine, since mining is based on a type of guessing, for every block, a different miner will guess the number and be granted the right to upgrade the blockchain. Obviously, that the miners with computing power will succeed more often, but on account of the law of statistical probability, its highly unlikely that the same miner will succeed each time. .

Now that you know what Bitcoin mining is, you may 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 click to find out more mining energy the network gets, the harder it is to imagine the answer to the mining mathematics problem. So the difficulty of the mining method is actually self-adjusting into the accumulated mining power the network owns. .

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

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He wanted to create a steady flow of new bitcoins into the 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 figured each ten minutes on average). .

Now, remember, this is on average. We can have two blocks being added minute after minute and then wait an hour to 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 made a type of arms race to acquire 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 difficulty was low. As Bitcoin started to catch on, people looked for more powerful mining solutions.

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