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However, just how can you create a system Which Has a decentralized ledger How do you give someone the ability to upgrade 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 that in a very creative way I like 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 system. Sounds simple, right
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Obviously, this guessing is done by your PC. The stronger your computer is, the further supposes you can make in one second, increasing your chances of winning this game. If you manage to guess 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 suspect, your mining system determines which of these current pending transactions will be grouped together into the next block of transactions. Compiling this block 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 created, along with your solution, is sent to the entire network so other computers can affirm it. Its somewhat similar to some Rubiks cube: The solution is quite tough to achieve but very easy to validate.
3. Every computer that validates your solution updates its copy of this Bitcoin transaction ledger with the transactions you chose to include in the block.
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 into the next block.
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6. All the transactions in the block youve just entered are now confirmed by the Bitcoin network and are virtually irreversible.
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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 type of guessing, for every block, a different miner will suppose the number and also 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 every 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 principles for mining in a manner that the further mining energy like this the network gets, the harder it is to imagine the answer to the mining mathematics issue. So the difficulty of the mining method is actually self-adjusting to the accumulated mining capability the network owns. .
If more miners join, it is going to get harder to solve the problem; when many of them fall off, it is going to get easier. This is known as mining difficulty.
Well, he wanted to create a steady flow 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 added every ten minutes (i.e., the number will probably be figured 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 for 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 great deal of miners out there. In reality, Satoshi, the inventor of Bitcoin, and also his friend Hal Finney were a couple of the only individuals mining Bitcoin back at 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, folks looked for more potent mining solutions.