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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 a lot of powerin case they become corrupt or negligent in their job

Well, Bitcoins rulesalso known as the Bitcoin protocolsolves this in a Really creative manner I like to phone Who Wants to Be a Banker

In short, anyone who wants to take part in updating the ledger of Bitcoin transactions, known as the blockchain, can do so. 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 done by your computer. The stronger your computer is, the more supposes you can make in a second, increasing your chances of winning this match. 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 the 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 generated, along with the solution, is sent to the entire network so other computers can validate it. Its somewhat similar to some Rubiks cube: The solution is very tough to achieve but quite easy to validate.

3. Every computer that validates your solution updates its copy of the Bitcoin transaction ledger together with the transactions you opted to include in the block.

4. The machine generates a fixed amount of bitcoins (currently 12.5) and benefits 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 block youve just 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 because of the fact that this process helps mine new Bitcoins from the system. But if you think about it, the mining component is just a by-product of this transaction confirmation process. So the name is somewhat misleading, since the main objective of mining is to maintain the ledger in a decentralized manner. .

As you can imagine, since mining is based on a form 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 on account of 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 principles for mining in a way that the further mining energy the network has, the harder it is to guess the answer to the mining math issue. Therefore the difficulty of the mining process is actually self-adjusting to the gathered mining capability the network possesses. .

If more miners join, it will get more difficult to address the issue; when many of them drop off, it will get easier. This can be 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 inserted each ten minutes (i.e., the number will be guessed each ten minutes on average). .

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 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 Continued as possible.

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