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But how do you create a system that has a decentralized ledger How can 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 very creative manner 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 easy, right

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Obviously, this guessing is done by your PC. The more powerful your computer is, the more supposes you can create in a second, increasing your chances of winning this game. If you manage to figure 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 program determines which of the current pending transactions will be grouped together into the next block of transactions. Compiling this cube represents your 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 created, 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 tough to attain but very easy to validate.

3. Each computer which validates your solution upgrades its copy of the Bitcoin transaction ledger together with the transactions that you opted to include in the cube.

4. The machine generates a fixed amount of bitcoins (currently 12.5) and benefits them as compensation for time and energy you spent solving the math problem.

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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 therefore are virtually irreversible.

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So thats Bitcoin mining in a nutshell. Its called mining due to the fact that this index procedure helps mine new Bitcoins from the computer system. But if you think about it, the mining component is just a by-product of this transaction confirmation procedure. So that the name is somewhat 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 suppose the number and 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 exact same miner will succeed every time. .

Now 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 guess the answer to the mining math problem. Therefore that the difficulty of this mining process is actually self-adjusting into the accumulated mining power the network possesses. .

If more miners join, it will get harder to address the problem; when many of them fall off, it will get easier. This can be known as mining issue.

Well, he wanted to create a steady flow of new bitcoins into the computer system. In a sense, this was 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 be figured every ten minutes on average). .

Now, rememberthis is on average. We can have How To Exchange Bitcoin For Usd 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 made a sort of arms race to get 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 also his friend Hal Finney were a few the only individuals mining Bitcoin back at 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 began to catch on, folks looked for more potent mining solutions.