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But how do you create a system that has a decentralized ledger How do you give someone the ability to upgrade the ledger without giving them too much powerin case they become corrupt or negligent in their job

Well, Bitcoins rulesalso known as the Bitcoin protocolsolves this in a very creative way I love to phone 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 so. Whatever 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 create in a second, increasing your chances of winning this game. If you manage to guess 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 computer comes up with the ideal 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 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 affirm it. Its a bit similar to a Rubiks cube: The solution is very tough to attain but very easy to validate.

3. Each computer which validates your solution upgrades its copy of this Bitcoin transaction ledger with the transactions that you opted to include in the block.

4. The machine generates a predetermined amount of bitcoins (currently 12.5) and rewards 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 cube youve just entered are now confirmed from the Bitcoin network and are virtually irreversible.

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Therefore thats Bitcoin mining in a nutshell. official statement 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 just a by-product of this transaction confirmation process. Therefore 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 every block, a different miner will suppose the number and be granted the right to upgrade the blockchain. Obviously, the miners with more computing power will succeed more often, but on account of 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 might be thinking, Cool! Free money! Where do I sign up Well, not so fast

Satoshi Nakamoto, check my source 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 that the difficulty of the mining method is really self-adjusting to the gathered mining capability the network owns. .

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

Well, he wanted to make a steady flow of new bitcoins into the computer system. In a sense, this has been done to keep inflation in check. Mining issue is set so that, on average, a new block will be added every ten minutes (i.e., the number is going check that to be figured every ten minutes on average). .

Now, remember, this is on average. We can have two cubes being added minute after minute and then wait an hour for the next block. In the long run, this will even out to ten minutes on average.

As you can imagine, this type of self-adjusting mechanism has made 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 on the market. In reality, Satoshi, the inventor of Bitcoin, and also his friend Hal Finney were a couple of the only individuals mining Bitcoin back in 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 issue was low. As Bitcoin started to catch on, people looked for more powerful mining solutions.