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But how do 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 Really creative way I love to call 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 so. Whatever you need is to suppose a random number that solves an equation generated by the computer system. Sounds easy, right
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Obviously, this guessing is done by your computer. The more powerful your computer is, the more supposes you can make in a second, increasing your chances of winning this game. If you manage to figure 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 your moment of glory, as youve now become 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 affirm it. Its somewhat similar to a Rubiks cube: The solution is very tough to attain but very easy to validate.
3. Every computer that validates your solution updates its copy of the Bitcoin transaction ledger with the transactions you chose to include in the cube.
4. The system 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 issue.
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5. Additionally, you get paid any transaction fees which were attached to the transactions you inserted into the next block.
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6. All the transactions in the cube youve only 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 merely a by-product of this transaction confirmation procedure. Therefore that the name is a bit 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 form of guessing, for every block, a different miner will suppose the number and be granted the right to update the blockchain. Obviously, that the miners with computing power will succeed more often, but due to the law of statistical probability, its highly unlikely that the exact same miner will succeed each 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 manner that the further mining energy the network gets, the harder it is to guess the answer to the mining mathematics problem. So the difficulty of this mining process is really self-adjusting to the accumulated mining capability the network owns. .
If more miners join, it will get harder to address the problem; when many of them fall off, it is going to get easier. This can be known as mining difficulty.
Now, remember, this is on average. We can have two blocks being added minute after minute and then wait an hour for the next block. In the long run, this may even out to ten see post minutes on average.
As you can imagine, this type 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 fact, Satoshi, the inventor of Bitcoin, and his friend Hal Finney were a couple i was reading this of the only individuals mining Bitcoin back at 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 issue was reduced. As Bitcoin began to catch on, folks looked for more potent mining solutions.