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However, just how do you create a system that has a decentralized ledger How do 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 this in a Really creative way 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. All you need is to suppose a random number that solves an equation generated by the system. Sounds easy, right

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Obviously, this guessing is done by your computer. The more powerful your computer is, the more supposes you can make in one second, increasing your chances of winning this match. If you manage to guess 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 computer comes up with the right guess, your mining system determines which of the current pending transactions will be grouped together into the next block of transactions. Compiling this block represents your moment of glory, as youve now become a temporary banker of Bitcoin who has to upgrade the Bitcoin transaction ledger known as the blockchain. .

2. The block youve generated, along with your solution, is sent to the whole network so other computers can affirm it. Its somewhat similar to a Rubiks cube: The solution is very hard 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 you chose to include in the block.

4. The system generates a fixed amount of bitcoins (currently 12.5) and rewards them 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 just entered are now confirmed by the Bitcoin network and are virtually irreversible.

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So thats Bitcoin mining in a check my blog 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 part is merely a by-product of the transaction confirmation process. So that the name is somewhat misleading, since the main goal 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 be granted the right to update 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 exact same miner will succeed each time. .

Now that 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. 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 will get more difficult to address the problem; when many of them drop off, it is going to get easier. This is known as mining difficulty.

Well, he wanted to make a steady flow of new bitcoins into the computer system. In a sense, this was done to keep inflation in check. Mining issue is set so that, on average, a new block will be added each ten minutes (i.e., the number is going to probably be figured every ten minutes on average). .

Now, rememberthis 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 type of self-adjusting mechanism has created a sort 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 out there. In reality, Satoshi, the inventor of Bitcoin, How To Make Money Mining Bitcoin and also his friend Hal Finney were a few the only individuals 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 in 2009, since mining difficulty was reduced. As Bitcoin started to catch on, people looked for more potent mining solutions.