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But how can you create a system that has a decentralized ledger How can you give someone the ability to upgrade 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 Really creative way I like to call Who Wants to Be a Banker
In a nutshell, anyone who wants to take part in updating the ledger of 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 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 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 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 develop into 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 validate it. Its a bit much like a Rubiks cube: The solution is quite tough to achieve but quite easy to validate.
3. Every 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 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 which were attached to the transactions you inserted into the next block.
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6. All the transactions in the block youve just entered are now confirmed by the Bitcoin network and are virtually irreversible.
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Therefore 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 a bit 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 each block, a different miner will guess the number and be granted the right to update the blockchain. Of course, the miners with computing power will succeed more often, but on account of the regulation 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 principles for mining in a manner that the further mining energy the network has, the harder it is to guess the answer to the mining math problem. Therefore the difficulty of this mining method is really self-adjusting into the accumulated mining power the network possesses. .
If more miners join, it will get harder to solve the problem; when many of them fall off, it will get easier. This is known as mining issue.
Now, remember, this 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 may even out to ten minutes on average.
As you can imagine, this type of self-adjusting mechanism has made a sort of arms race to acquire 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 reality, Satoshi, the inventor of Bitcoin, and his friend Hal Finney were a couple 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 his explanation issue was low. As Bitcoin began to catch on, folks looked for more powerful mining solutions.