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But how can you create a system Which Has a decentralized ledger How do 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 this in a very creative way I like to call Who Wants to Be a Banker

In a nutshell, anyone who wants to take part in updating the ledger of Bitcoin transactions, known as the blockchain, can do this. Whatever 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 done by your PC. The more powerful your computer is, the more guesses you can make in one second, increasing your chances of winning this match. If you manage to guess 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 computer comes up with the ideal guess, your mining system determines which of these 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 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 affirm it. Its a bit similar to a Rubiks cube: The solution is very tough to attain but very easy to validate.

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

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 problem.

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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. All the transactions in the block youve just entered are now confirmed by the Bitcoin network and are virtually irreversible.

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So 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 merely a by-product of the transaction confirmation process. 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 every block, a different miner will suppose the number and be granted the right to update the blockchain. Obviously, the advice miners with more computing power will succeed more often, but due to 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 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 guess the answer to the mining math problem. So the difficulty of the mining method is really self-adjusting into the gathered mining power the network possesses. .

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

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Well, he wanted to create a steady stream 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 will 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 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 made a type of arms race to get the most efficient Read More Here and powerful miners as soon as possible.

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When Bitcoin first started out, there werent a lot of miners on the market. In reality, Satoshi, the inventor of Bitcoin, and also his friend Hal Finney were a few 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 issue was reduced. Since Bitcoin began to catch on, people looked for more powerful mining solutions.

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