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However, how can you create a system Which 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 manner I love to phone Who Wants to Be a Banker
In a nutshell, anyone who wants to participate in updating the ledger of all Bitcoin transactions, known as the blockchain, can do this. Whatever you need is to suppose a random number that solves an equation generated by the computer system. Sounds simple, right
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Obviously, this guessing is done by your computer. The stronger your computer is, the further guesses you can make in a second, increasing your chances of winning this match. If you manage to guess 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 pc comes up with the ideal guess, 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 has 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 a bit much like some Rubiks cube: The solution is very hard to attain but quite easy to validate.
3. Each computer that validates your solution upgrades its copy of this Bitcoin transaction ledger together with the transactions you chose to include in the block.
4. The machine generates a predetermined amount of bitcoins (currently 12.5) and rewards them 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 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 simple fact that this process helps mine new Bitcoins from the system. But if you think about it, the mining part is just a by-product of the transaction confirmation process. Therefore 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 every block, a different miner will suppose the number and be granted the right to upgrade 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 more mining power the network gets, the harder it is to guess the answer to the mining math problem. So the difficulty of the mining process is really self-adjusting into the gathered mining power the network possesses. .
If more miners join, it is going to get harder to address the issue; when many of them fall off, it is going to get easier. This can be known as mining difficulty.
Now, rememberthis 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 kind 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 lot of 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 in the time using their own personal computers.
Using your CPU (central processing unityour computers brain click here for info 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, people looked for more powerful mining solutions.