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But how do you create a system that 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 this in a Really creative manner I love 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 this. All you need is to guess a random number that solves an equation generated by the computer system. Sounds easy, right

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Obviously, this guessing is all done by your PC. 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 right, 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 suspect, your mining system 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 develop into a temporary banker of Bitcoin who has 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 a bit much like a Rubiks cube: The solution is quite hard to achieve but quite easy to validate.

3. Every computer which validates your solution upgrades its copy of this Bitcoin transaction ledger together with the transactions you chose to include in the block.

4. The machine generates a predetermined 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. Each of the transactions in the block youve only entered are now confirmed by the Bitcoin network and are virtually irreversible.

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Therefore thats Bitcoin mining in a nutshell. Its called mining because of the fact that this procedure helps mine new Bitcoins from the system. But if you think about it, the mining component is merely a by-product of the transaction confirmation process. Therefore that the name is a bit 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 form of guessing, for each block, a different miner will suppose the number and be granted the right to update the blockchain. Of course, that the miners with computing power will succeed more often, but on account of the law of statistical probability, its highly unlikely that the exact same miner will succeed each 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 math issue. So the difficulty of this mining method is actually self-adjusting to the gathered mining capability the network owns. .

If more go now miners join, it is going to get more difficult 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 was done to keep inflation in check. Mining difficulty is set so that, on average, a new block will be added each ten minutes (i.e., the number will probably be guessed every ten minutes on average). .

Now, rememberthis is on average. We can have two blocks 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 type of arms race to acquire the most efficient and strong miners as soon as possible.

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When Bitcoin first started out, there werent a great deal of miners on the market. In fact, Satoshi, the inventor of Bitcoin, and also 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 low. As Bitcoin started to catch on, people looked for more potent mining solutions.