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However, just how do you create a system that has a decentralized ledger How can 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 very creative way I like to phone Who Wants to Be a Banker
In a nutshell, anyone who wants to take part in updating the ledger of all Bitcoin transactions, known as the blockchain, can do this. Whatever you need is to guess a random number that solves an equation generated by the computer system. Sounds easy, right
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Of course, this guessing is done by your computer. The stronger your computer is, the further supposes you can make in a second, increasing your chances of winning this game. If you manage to figure 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 system 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 update the Bitcoin transaction ledger known as the blockchain. .
2. The block youve generated, 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 very tough to achieve but very easy to validate.
3. Each computer that validates your solution upgrades its copy of this Bitcoin transaction ledger with the transactions that you opted to include in the block.
4. The machine generates a fixed amount of bitcoins (currently 12.5) and rewards them as compensation for the time and energy you spent solving the math problem.
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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 only entered are now confirmed by the Bitcoin network and therefore are virtually irreversible.
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Therefore thats Bitcoin mining in a 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 just a by-product of this transaction confirmation procedure. Therefore the name is somewhat misleading, since the main goal of mining is to maintain the ledger in a decentralized manner. .
As Cryptocurrency Price List you can imagine, since mining is based on a form of guessing, for every block, a different miner will suppose the number and also be granted the right to update the blockchain. Obviously, that the miners with computing power will succeed more often, but on account of the law of statistical probability, its highly unlikely that the 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 gets, the harder it is to imagine the answer to the mining mathematics issue. Therefore that the difficulty of the mining process is actually self-adjusting to the accumulated mining capability the network owns. .
If more miners join, it will get harder to address the issue; when many of them drop off, it will get easier. This is known as mining issue.
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 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 out there. In reality, Satoshi, the inventor of Bitcoin, and also his friend Hal Finney were a few 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 difficulty was reduced. As Bitcoin started to catch on, people looked for more powerful mining solutions.