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However, just how can 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 job
Well, Bitcoins rulesalso known as the Bitcoin protocolsolves that in a very creative way I love to call Who Wants to Be a Banker
In short, anyone who wants to participate in updating the ledger of Bitcoin transactions, known as the blockchain, can do this. All you need is to suppose a random number that solves an equation generated by the computer system. Sounds simple, right
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Obviously, this guessing is done by your computer. The stronger your computer is, the further supposes you can create 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 right suspect, your mining system 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 has to update the Bitcoin transaction ledger known as the blockchain. .
2. The block youve generated, along with your solution, is sent to the whole network so other computers can validate 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 together with the transactions that you opted to include in the cube.
4. The machine generates a predetermined amount of bitcoins (currently 12.5) and benefits them to you 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 only entered are now confirmed by the Bitcoin network and therefore are virtually irreversible.
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So thats Bitcoin mining in a nutshell. Its called mining due to the simple fact that this process helps mine new Bitcoins from Continue the computer system. But if you think about it, the mining part is merely a by-product of this transaction confirmation procedure. Therefore 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 type of guessing, for each block, a different miner will guess the number and be granted the right to upgrade the blockchain. Of course, that 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 each time. .
Now 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 more mining energy the network has, the harder it is to guess the answer to the mining mathematics issue. Therefore see here the difficulty of this mining method is really self-adjusting into the gathered mining power the network possesses. .
If more miners join, it will get harder to solve the problem; if many of them fall off, it will get easier. This can be known as mining difficulty.
Now, remember, this 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 type of self-adjusting mechanism has made 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 lot of miners out there. In fact, Satoshi, the inventor of Bitcoin, and his friend Hal Finney were a couple of the only people mining Bitcoin back at 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. As Bitcoin began to catch on, people looked for more powerful mining solutions.