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However, 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 too much powerin case they become corrupt or negligent in their work

Well, Bitcoins rulesalso known as the Bitcoin protocolsolves this in a very creative way I like to call 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. All 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 stronger your computer is, the more supposes you can make in one 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 program determines which of the 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 has to update the Bitcoin transaction ledger known as the blockchain. .

2. The block youve created, along with your solution, is sent to the entire network so other computers can validate it. Its a bit much like a Rubiks cube: The solution is very tough to achieve but quite easy to validate.

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

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 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. Each of the transactions in the block youve only entered are now confirmed from the Bitcoin network and 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 computer 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 go to website 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 update the blockchain. Of course, that the miners with more computing power will succeed more often, but due to the law of statistical probability, its highly unlikely that the 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 rules for mining in a way that the further mining energy the network gets, the harder it is to guess the answer to the mining mathematics issue. So that the difficulty of this mining process is actually self-adjusting to the accumulated mining capability the network owns. .

If more miners join, it will get more difficult to solve the issue; when many of them drop off, it will get easier. This is known as mining difficulty.

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

Now, rememberthis is on average. We can have two blocks being inserted 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 type of self-adjusting mechanism has created a type 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 his friend Hal Finney were a couple of the only individuals 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 issue was low. Since Bitcoin started to catch on, folks looked for more powerful mining solutions.