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But how do you create a system that has a decentralized ledger How do you give someone the ability to update 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 this in a very creative way I like to phone 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 so. All you need is to guess a random number that solves an equation generated by the computer system. Sounds simple, right

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Of course, this guessing is all done by your computer. The more powerful your computer is, the further supposes you can make in one second, increasing your chances of winning this match. If you manage to figure correctly, you earn bitcoins and have to write the next page of Bitcoin transactions on the blockchain. .

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1. Once your mining pc comes up with the ideal guess, your mining program determines which of these current pending transactions will be grouped together into the next block of transactions. Compiling this block represents your 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 entire network so other computers can validate it. Its somewhat much like a Rubiks cube: The solution is very tough to achieve but quite easy to validate.

3. Each computer that validates your solution updates its copy of the Bitcoin transaction ledger with the transactions you opted to include in the cube.

4. The machine generates a fixed 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 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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So thats Bitcoin mining in a nutshell. Its called mining due to the fact that this process helps mine new Bitcoins from the computer system. But if you think about it, the mining part is merely a by-product of this transaction confirmation process. So that the name is a bit 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 form of guessing, for each block, a different miner will guess the number and be granted the right to update the blockchain. Of course, that 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 each time. . i thought about this

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 more mining power the network gets, the harder it is to imagine the answer to the mining math problem. Therefore that the difficulty of this mining method is really self-adjusting to the gathered mining capability the network owns. .

If more miners join, it is going to get harder to address the problem; if many of them fall off, it will get easier. This is known as mining difficulty.

He wanted to make a steady stream of new bitcoins into the system. In a sense, this has been 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 guessed each ten minutes on average). Full Report .

Now, remember, this is on average. We can have two official source blocks being added 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 kind of self-adjusting mechanism has made 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 out there. 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 difficulty was reduced. As Bitcoin began to catch on, people looked for more potent mining solutions.