How To Make Money Mining Bitcoin for Beginners
However, just how do 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 job
Well, Bitcoins rulesalso known as the Bitcoin protocolsolves that in a Really creative manner I like to call Who Wants to Be a Banker
In a nutshell, anyone who wants to participate in updating the ledger of all Bitcoin transactions, known as the blockchain, can do this. Whatever you need is to suppose a random number that solves an equation generated by the computer system. Sounds simple, right
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Of course, this guessing is done by your PC. The stronger your computer is, the more 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 computer comes up with the right suspect, 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 develop into 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 a bit similar to some Rubiks cube: The solution is quite tough to achieve but quite easy to validate.
3. Each computer that validates your solution updates its copy of this Bitcoin transaction ledger together with the transactions you opted to include in the cube.
4. The machine generates a predetermined amount of bitcoins (currently 12.5) and rewards them as compensation for 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. All the transactions in the block youve only entered are now confirmed from the Bitcoin network and 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 computer system. But if you think about it, the mining part is just a by-product of this transaction confirmation procedure. Therefore 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 type of guessing, for every block, a different miner will guess the number and be granted the right to upgrade 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 exact same miner will succeed every time. .
Now 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 manner that the further mining power the network gets, the harder it is to guess the answer to the mining math issue. So the difficulty of this mining method is actually self-adjusting to the accumulated mining power the network owns. .
If more miners join, it will get harder to solve the issue; if many of them drop off, it will get easier. This is known as mining issue.
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 difficulty is set so that, on average, a new block will be added every ten minutes (i.e., the number is going to probably be figured each ten minutes on average). .
Now, remember, this is on helpful resources 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 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, and his friend Hal Finney were a few the only people 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 difficulty was low. Since Bitcoin started to catch on, people looked for more potent mining solutions.