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But just how do you create a system Which Has a decentralized ledger How can you give someone the ability to upgrade the ledger without giving them a lot of powerin case they become corrupt or negligent in their work
Well, Bitcoins rulesalso known as the Bitcoin protocolsolves that in a very creative manner I like to call Who Wants to Be a Banker
In short, anyone who wants to participate in updating the ledger of all 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 simple, right
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Obviously, this guessing is done by your computer. The stronger your computer is, the further guesses you can make in a second, increasing your chances of winning this match. If you manage to figure 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 system determines which of the current pending transactions will be grouped together into the next block of transactions. Compiling this cube represents your moment of glory, as youve now develop into a temporary banker of Bitcoin who has to upgrade the Bitcoin transaction ledger known as the blockchain. .
2. The block youve generated, along with your solution, is sent to the entire network so other computers can affirm it. Its somewhat much like a Rubiks cube: The solution is very hard to attain but quite easy to validate.
3. Each computer that validates your solution upgrades its copy of this 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 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 therefore are virtually irreversible.
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Therefore thats Bitcoin mining in a nutshell. Its called mining due to the simple 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 this transaction confirmation procedure. So 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 type 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 more 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 may 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 way that the further mining power the network has, the harder it is to imagine the answer to the mining mathematics problem. Therefore the difficulty of this mining process is really self-adjusting to the accumulated mining power the network possesses. .
If more miners join, it will get more difficult to address the issue; if many of them fall off, it will get easier. This can be known as mining issue.
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 type of self-adjusting mechanism has created 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 reality, Satoshi, the inventor of Bitcoin, and also 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 issue was low. As Bitcoin began to catch on, people looked for more powerful mining solutions.