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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 too much powerin case they become corrupt or negligent in their job

Well, Bitcoins rulesalso known as the Bitcoin protocolsolves that in a Really creative way I like to phone Who Wants to Be a Banker

In short, anyone who wants to take part in updating the ledger of all Bitcoin transactions, known as the blockchain, can do so. Whatever you need is to guess a random number that solves an equation generated by the system. Sounds easy, right

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Obviously, this guessing is all done by your PC. The stronger your computer is, the further supposes you can create in one second, increasing your chances of winning this match. If you manage to figure correctly, 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 suspect, your mining system 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 develop into a temporary banker of Bitcoin who gets to upgrade the Bitcoin transaction ledger known as the blockchain. .

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

3. Every computer that validates your solution updates its copy of the Bitcoin transaction ledger with the transactions you chose 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 issue.

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5. Additionally, you get paid any transaction fees which were attached to the transactions you inserted directory 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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So thats Bitcoin mining in a nutshell. Its called mining due to the fact that this process helps mine new Bitcoins from the system. But if you think about it, the mining part YOURURL.com is merely a by-product of this transaction confirmation process. Therefore the name is a bit 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 guess the number and be granted the right to upgrade the blockchain. Obviously, the 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 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 further mining energy the network has, the harder it is to guess the answer to the mining math problem. Therefore the difficulty of this mining process is actually self-adjusting into the accumulated mining power the network owns. .

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

Well, 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 probably be guessed every ten minutes on average). .

Now, remember, this is on average. We can have two cubes being inserted minute after minute and then wait an hour to the next block. In the long run, this will even out to ten minutes on average.

As you can imagine, this type of self-adjusting mechanism has created a sort 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 great deal of miners on the market. In reality, Satoshi, the inventor of Bitcoin, and his friend Hal Finney were a few the only people 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 low. Since Bitcoin began to catch on, people looked for more powerful mining solutions.