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However, 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 this in a very creative manner I like to phone Who Wants to Be a Banker
In short, anyone who wants to take part in updating the ledger of Bitcoin transactions, known as the blockchain, can do so. Whatever you need is to suppose a random number that solves an equation generated by the computer system. Sounds easy, right
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Of course, this guessing is done by your computer. The more powerful your computer is, the more guesses you can create in a second, increasing your chances of winning this match. If you manage to guess 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 guess, your mining program determines which of the current pending transactions will be grouped together into the next block of transactions. Compiling this block represents your 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 your solution, is sent to the whole network so other computers can affirm it. Its somewhat much like a Rubiks cube: The solution is quite tough to achieve but quite easy to validate.
3. Every computer that validates your solution updates its copy of the Bitcoin transaction ledger together 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 to you as compensation for 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 block 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 because of the simple fact that this process helps mine new Bitcoins from the computer system. But if you think about it, the mining these details component is just a by-product of this transaction confirmation process. So that 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 type of guessing, for each block, a different miner will guess 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 on account of the law of statistical probability, its highly unlikely that the same miner will succeed each 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 way that the further mining energy the network gets, the harder it is to guess the answer to the mining math issue. So the difficulty of this mining process is actually self-adjusting to the accumulated mining power the network owns. .
If more miners join, it will get more difficult to address the issue; if 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 cubes being added minute after minute and then wait an find more information 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 created a type 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 fact, Satoshi, the inventor of Bitcoin, and his friend Hal Finney were a few 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 issue was reduced. As Bitcoin began to catch on, people looked for more potent mining solutions.