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However, just how do you create a system Which Has a decentralized ledger How can you give someone the ability to update 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 Really creative way I love to phone Who Wants to Be a Banker

In short, anyone who wants to participate 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 easy, right

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Obviously, this guessing is done by your PC. The more powerful your computer is, the further supposes you can create in one second, increasing your chances of winning this game. If you manage to figure right, 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 guess, your mining program 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 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 validate it. Its a bit much like some Rubiks cube: The solution is very hard to attain but very easy to validate.

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

4. The system generates a fixed amount of bitcoins (currently 12.5) and benefits them to you 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 which were attached to the transactions you inserted into the next block.

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6. All the transactions in the cube youve only entered are now confirmed by the Bitcoin network and are virtually irreversible.

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Therefore 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 component is just a by-product of the transaction confirmation procedure. So that the name is official website 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 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 due to the law of statistical probability, its highly unlikely that the same miner will succeed each time. .

Now 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 manner that the more mining energy the network has, the harder it is to imagine the answer to the mining mathematics problem. Therefore the difficulty of the mining method is actually self-adjusting into the gathered mining power the network owns. .

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

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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 issue is set so that, on average, a new block will be inserted every ten minutes (i.e., the number will be guessed every ten minutes on average). .

Now, rememberthis is on average. We can have two blocks being inserted 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 additional resources mechanism has created a sort 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 reality, Satoshi, the inventor of Bitcoin, and his friend Hal Finney were a few the only individuals mining Bitcoin back at the time using other 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. Since Bitcoin began to catch on, people looked for more powerful mining solutions.

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