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However, 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 too much powerin case they become corrupt or negligent in their work

Well, Bitcoins rulesalso known as the Bitcoin protocolsolves this in a Really creative way 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 this. All you need is to guess a random number that solves an equation generated by the system. Sounds easy, right

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Obviously, this guessing is all done by your computer. The more powerful your computer is, the more guesses you can create in one second, increasing your chances of winning this game. If you manage to figure 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 right suspect, 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 become a temporary banker of Bitcoin who gets 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 validate it. Its somewhat much like a Rubiks cube: The solution is quite hard to achieve but very easy to validate.

3. Each computer that 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 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 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 computer system. But if you think about it, the mining part is just a by-product of the transaction confirmation process. 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 also be granted the right to update the blockchain. Of this course, the miners with 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 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 manner that the further mining power the network has, the harder it is to imagine the answer to the mining mathematics issue. Therefore the difficulty of the mining process is actually self-adjusting into the accumulated mining power the network possesses. .

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

Well, he wanted to make a steady stream of new bitcoins into the computer 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 every ten minutes (i.e., the number is going to probably be figured every ten minutes on average). .

Now, rememberthis is on average. We can have two cubes being inserted 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 type of self-adjusting mechanism has created a type of arms race to get 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 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 low. As Bitcoin began to catch on, folks looked for more potent mining solutions.