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But just how do you create a system that has a decentralized ledger How do you give someone the ability to upgrade 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 this in a Really creative way I like 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 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 PC. The stronger your computer is, the more guesses you can make in one second, increasing your chances of winning this match. 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 computer comes up with the right suspect, your mining program determines which of these current pending transactions will be grouped together into the next block of transactions. Compiling this block 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 the solution, is sent to the whole network so other computers can validate it. Its a bit much like a Rubiks cube: The solution is quite tough to achieve but quite easy to validate.

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

4. The machine generates a fixed amount of bitcoins (currently 12.5) and benefits 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 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 by the Bitcoin network and therefore are virtually irreversible.

How To Make Money Mining Bitcoin for Dummies

So thats Bitcoin mining in a nutshell. Its called mining because of the fact that this procedure helps mine new Bitcoins from the system. But if you think about it, the mining component is merely a by-product of the transaction confirmation procedure. Therefore 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 each block, a different miner will suppose the number and be granted the right to upgrade the blockchain. Obviously, the miners with more 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 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 rules for mining in a manner that the more mining energy the network gets, the harder it is to guess the answer to the mining math issue. So that the difficulty of this mining process is really self-adjusting into the accumulated mining power the network owns. .

If more miners join, it is going to get harder to solve the problem; if many of them fall off, it is going to get easier. This is known as mining difficulty.

Well, he wanted to create a steady flow of new bitcoins into the computer system. In a sense, this was done to click resources keep inflation in check. Mining difficulty is set so that, on average, a new block will be added every ten minutes (i.e., the number is going to probably be guessed 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 kind of self-adjusting mechanism has created a sort of arms race to acquire the most efficient and powerful miners as soon as possible.

What Does How To Make Money Mining Bitcoin Do?

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