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But how do 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 manner I like to phone 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 so. Whatever you need is to guess a random number that solves an equation generated by the computer system. Sounds easy, right
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Obviously, this guessing is all done by your PC. The stronger your computer is, the further guesses 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 ideal guess, your mining system determines which of the current pending transactions will be grouped together into the next block of transactions. Compiling this cube represents your 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 created, along with your solution, is sent to the entire network so other computers can affirm it. Its somewhat much like some Rubiks cube: The solution is quite tough to attain but quite easy to validate.
3. Each computer that 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 as compensation for time and energy you spent solving the math issue.
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5. Additionally, you get paid any transaction fees that like it were attached to the transactions you inserted into the next block.
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6. Each of 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 because of the 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 this transaction confirmation procedure. So that the name is somewhat misleading, since the main goal of mining is to maintain the ledger in a decentralized manner. .
As you can imagine, since you can try here mining is based on a type of guessing, for every block, a different miner will suppose the number and be granted the right to update the blockchain. Obviously, 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 every time. .
Now that 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, site crafted the principles for mining in a way that the further mining power the network has, the harder it is to guess the answer to the mining math problem. Therefore the difficulty of this mining process is actually self-adjusting into the gathered mining capability the network possesses. .
If more miners join, it is going to get harder to address the issue; if many of them drop off, it will get easier. This is 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 to the next block. In the long run, this may even out to ten minutes on average.
As you can imagine, this kind of self-adjusting mechanism has created a sort 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 great deal of miners out there. In reality, Satoshi, the inventor of Bitcoin, and also his friend Hal Finney were a couple of the only individuals mining Bitcoin back in 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 low. Since Bitcoin began to catch on, folks looked for more potent mining solutions.