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However, just 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 too much powerin case they become corrupt or negligent in their work

Well, Bitcoins rulesalso known as the Bitcoin protocolsolves that in a very creative way I like to call Who Wants to Be a Banker

In short, anyone who wants to take part 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 system. Sounds easy, right

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Of course, this guessing is all done by your computer. The stronger your computer is, the further guesses you can create in one second, increasing your chances of winning this game. If you manage to guess 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 computer comes up with the right suspect, your mining program 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 gets 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 affirm it. Its somewhat much like some Rubiks cube: The solution is very tough to achieve 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 opted to include in the cube.

4. The machine generates a predetermined amount of bitcoins (currently 12.5) and benefits them as compensation for the time and energy you spent solving the math problem.

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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 cube youve just entered are now confirmed by the Bitcoin network and therefore are virtually irreversible.

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Therefore 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 just a by-product of this transaction confirmation process. Therefore 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 mining is based on a form of guessing, for every block, a different miner will suppose the number and also be granted the right to update the blockchain. Of course, the miners with more computing power will succeed more often, but due to the regulation of statistical probability, its highly unlikely that the same miner will succeed each 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 power the network gets, the harder it is to guess the answer to the mining mathematics problem. So the difficulty of the mining method is really self-adjusting into the accumulated mining power the network owns. .

If more miners join, it is going to get more difficult to solve the problem; when many of them fall off, it will get easier. This is known as mining issue.

He wanted to make a steady stream of new bitcoins into the system. In a sense, this was done to keep inflation in check. Mining difficulty is set so that, on average, a new block will be inserted every ten minutes (i.e., the number is going to probably be figured each ten minutes on average). .

Now, remember, this is on average. We can have two cubes being inserted 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 made a sort of arms race to get the most efficient and strong miners as soon important link as possible.

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When Bitcoin first started out, there werent a lot look at more info of miners out there. In reality, Satoshi, the inventor of Bitcoin, and his friend Hal Finney were a few the only individuals mining Bitcoin back in the time with 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. Since Bitcoin started to catch on, folks looked for more potent mining solutions.