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But 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 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 a nutshell, anyone who wants to participate in updating the ledger of 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 system. Sounds simple, right

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Obviously, this guessing is all done by your PC. The more powerful your computer is, the further supposes you can create in one second, increasing your chances of winning this game. If you manage to figure correctly, 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 ideal 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 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 the solution, is sent to the whole network so other computers can validate it. Its somewhat similar to a Rubiks cube: The solution is very hard to achieve but quite easy to validate.

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

4. The system generates a fixed amount of bitcoins (currently 12.5) and rewards them to you 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 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 due to the fact that this process helps mine new Bitcoins from the system. But if you think about it, the mining component is merely a by-product of this transaction confirmation process. So the name is somewhat misleading, since the main objective 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 each block, a different miner will suppose the number and also be granted the right to upgrade the blockchain. Of course, the miners with more computing power will succeed more often, but on account of the regulation 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 way that the more mining read more energy the network has, the harder it is to guess the answer to the mining math issue. So the difficulty of this mining method is actually self-adjusting into the gathered mining power the network possesses. .

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

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 every ten minutes (i.e., the number is going to probably be figured each ten minutes on average). .

Now, rememberthis is on average. We can have two cubes being added minute after minute and then wait an hour for 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 made a type of arms race to get the most efficient and powerful miners as soon as possible.

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When Bitcoin first started out, there werent a lot of miners on the market. In reality, Satoshi, the inventor of Bitcoin, and his friend Hal Finney were a couple of the only people mining Bitcoin back in 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 low. Since Bitcoin started to catch on, folks looked for more powerful mining solutions.