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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 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 that in a very creative manner I love to call 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. Whatever you need is to suppose a random number that solves an equation generated by the system. Sounds simple, right

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Of course, this guessing is done by your computer. The more powerful your computer is, the further supposes you can make in a second, increasing your chances of winning this match. If you manage to figure 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 ideal guess, 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 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 a bit much like a Rubiks cube: The solution is quite hard to attain but quite easy to validate.

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

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

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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 cube youve just entered are now confirmed from 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 computer system. But if you think about it, the mining part is just a by-product of this transaction confirmation process. So the name is somewhat misleading, since the main objective of mining is to maintain the ledger in a decentralized manner. .

As you can imagine, since mining is based on a form of guessing, for each 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 often, but due to 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 mathematics issue. So the difficulty of the mining method is actually self-adjusting to the accumulated mining power the network owns. .

If more miners join, it will get more difficult to solve the issue; if many of them fall off, it will get easier. This can her latest blog be known as mining difficulty.

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Well, he wanted to make a steady stream of new bitcoins into the computer 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 inserted every ten minutes (i.e., the number will probably be figured 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 to the next block. In the long run, this may 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 started out, there werent a great deal of miners out there. In fact, Satoshi, the inventor of Bitcoin, and his friend Hal Finney were a couple of the only people mining Bitcoin back at the time using their own personal computers.

Using your CPU (central processing unityour computers click this 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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