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However, how do you create a system Which 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 job
Well, Bitcoins rulesalso known as the Bitcoin protocolsolves this in a Really creative way I love to call Who Wants to Be a Banker
In short, anyone who wants to take part in updating the ledger of all Bitcoin transactions, known as the blockchain, can do this. Whatever you need is to suppose a random number that solves an equation generated by the 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 one 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 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 your moment of glory, as youve now become a temporary banker of Bitcoin who has to upgrade 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 somewhat similar to a Rubiks cube: The solution is very tough to attain but very easy to validate.
3. Each computer that validates your solution upgrades its copy of this Bitcoin transaction ledger together with the transactions that you chose to include in the cube.
4. The system generates a fixed amount of bitcoins (currently 12.5) and rewards them 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 just entered are now confirmed from 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 system. But if you think about it, the mining part is merely a by-product of this transaction confirmation process. 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 also be granted the right to update the blockchain. Obviously, you could try this out the miners with more computing power will succeed more often, but on account of the regulation of statistical probability, its highly unlikely that the exact same miner will succeed every 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 more mining energy the network has, the harder it is to imagine the answer to the mining math problem. Therefore the difficulty of the mining process is really self-adjusting to the accumulated mining capability the network possesses. .
If more miners join, it is going to get harder to solve the problem; if many of them fall off, it is going to get easier. This is 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 kind 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 also his friend Hal Finney were a couple of the only individuals mining Bitcoin back in 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 reduced. Since Bitcoin began to catch on, people looked for more powerful mining solutions.