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But 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 Really creative manner I love to call 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 this. 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 computer. The stronger your computer is, the further guesses you can create 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 pc comes up with the right suspect, your mining system 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 develop into a temporary banker of Bitcoin who has 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 validate it. Its a bit similar to some Rubiks cube: The solution is very tough to attain but very easy to validate.
3. Each computer which validates your solution upgrades its copy of this Bitcoin transaction ledger with the transactions that you opted to include in the cube.
4. The system generates a fixed amount of bitcoins (currently 12.5) and rewards 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 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 just entered are now confirmed by the Bitcoin network and therefore are virtually irreversible.
How To Make Money Mining Bitcoin Things To Know Before You Get This
So thats Bitcoin mining in a nutshell. Its called mining because of the fact that this process helps mine new Bitcoins from the system. But if you think about it, the mining part is just a by-product of the transaction confirmation process. So the name is a bit misleading, since the main goal of mining would be 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 guess the number and be granted the right to update the blockchain. Of course, 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 every 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 way that the more mining energy the network gets, the harder it is to imagine the answer to the mining math problem. So that the difficulty of this mining process is actually self-adjusting into the gathered mining power the network possesses. .
If more miners join, it is going to get more difficult to address the issue; when many of them fall off, it will get easier. This can be known as mining issue.
Now, rememberthis 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 will even out to ten minutes on average.
As you can imagine, this type of self-adjusting mechanism has created 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 lot of miners on the market. In fact, Satoshi, the inventor of Bitcoin, go to these guys and also his friend Hal Finney were a few the only people mining Bitcoin back in 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 view website in 2009, since mining difficulty was reduced. As Bitcoin began to catch on, people looked for more powerful mining solutions.