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But just how can you create a system that has a decentralized ledger How do 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 this in a very creative manner I like to phone Who Wants to Be a Banker

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

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Of course, this guessing is all done by your computer. The stronger your computer is, the more supposes you can make in a second, increasing your chances of winning this game. If you manage to guess 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 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 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 quite hard to achieve but quite easy to validate.

3. Every computer that 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 predetermined 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 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 by the Bitcoin network and therefore are virtually irreversible.

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So thats Bitcoin mining in a nutshell. Its called mining because of the simple fact that this procedure 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 procedure. So that 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 every block, a different miner will guess the number and be granted the right to update the blockchain. Of course, that the miners with computing power will succeed more often, but on account of 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 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 has, the harder it is to imagine the answer to the mining mathematics issue. Therefore the difficulty of the mining process is actually self-adjusting to the gathered mining power the network possesses. .

If more miners join, it is going to get more difficult to solve the issue; when many of them drop off, it will get easier. This is known as mining difficulty.

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Well, he wanted to make a steady stream of new bitcoins into the 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 each ten minutes (i.e., the number is going to be figured each 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 will even out to ten minutes on average.

As you can imagine, this kind 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 great deal of miners out there. In fact, Satoshi, the inventor of Bitcoin, and his friend Hal Finney were a More Help couple of the only individuals 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 reduced. Since Bitcoin started to catch on, people looked for more potent mining solutions.

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