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But how do you create a system Which 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 job
Well, Bitcoins rulesalso known as the Bitcoin protocolsolves that in a Really creative manner I love 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 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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Of course, this guessing is all done by your PC. The stronger your computer is, the more supposes you can make in a second, increasing your chances of winning this match. If you manage to figure right, 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 these current pending transactions will be grouped together into the next block of transactions. Compiling this cube represents the 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 generated, along with the solution, is sent to the whole network so other computers can validate it. Its somewhat similar to a Rubiks cube: The solution is very tough to attain but very easy to validate.
3. Every computer which validates your solution updates its copy of the Bitcoin transaction ledger with the transactions that you chose to include in the block.
4. The machine 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 were attached to the transactions you inserted into the next block.
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6. All the transactions in the block youve only entered are now confirmed from the Bitcoin network and therefore are virtually irreversible.
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So thats Bitcoin mining in a nutshell. Its called mining because of 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 procedure. Therefore that the name is somewhat 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 each block, a different miner will guess the number and be granted the right to upgrade 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 same miner will succeed every time. .
Now that 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 math problem. So the difficulty of this mining method is really self-adjusting to the accumulated mining power the network possesses. .
If more miners join, it will get more check this difficult to address the problem; if many of them drop off, it is going to get easier. This is known as mining issue.
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 fact, Satoshi, the inventor of Bitcoin, and his friend Hal Finney were a few 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 difficulty was reduced. As Bitcoin started to catch on, folks looked for more powerful mining solutions.