What Does How To Make Money Mining Bitcoin Mean?
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 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 phone Who Wants to Be a Banker
In a nutshell, anyone who wants to participate in updating the ledger of all Bitcoin transactions, known as the blockchain, can do this. Whatever you need is to guess a random number that solves an equation generated by the computer system. Sounds simple, right
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Obviously, this guessing is done by your PC. The stronger 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 get 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 guess, your mining system determines which of the current pending transactions will be grouped together into the next block of transactions. Compiling this block represents the 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 created, along with your solution, is sent to the entire network so other computers can validate it. Its somewhat much like some Rubiks cube: The solution is quite tough to achieve but very easy to validate.
3. Every computer that validates your solution upgrades its copy of this Bitcoin transaction ledger together with the transactions that you chose to include in the block.
4. The system generates a fixed amount of bitcoins (currently 12.5) and benefits them to you as compensation for the time and energy you spent solving the math issue.
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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 cube youve only entered are now confirmed from the Bitcoin network and are virtually irreversible.
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Therefore thats Bitcoin mining in a nutshell. Its called mining due to the simple fact that this process helps mine new Bitcoins from the system. But if you think about it, the mining component is just a by-product of the transaction confirmation procedure. So the name is somewhat misleading, since the main goal of mining would be to maintain the ledger in a decentralized manner. .
As you can imagine, since mining is based on a type of guessing, for every block, a different miner will guess the number and also be granted the right to upgrade the blockchain. Of course, that the miners with computing power will succeed more often, but due to 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 might 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 more mining energy the network has, the harder it is to Full Article imagine the answer to the mining math problem. Therefore that the difficulty of the mining method is actually self-adjusting into the accumulated mining capability the network owns. .
If more miners join, it is going to get more difficult to solve the problem; when many of them fall off, it will get easier. This is known as mining issue.
Now, remember, this is on average. We can have two blocks 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 created a sort of arms race to get 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 his friend Hal Finney were a few 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 difficulty was reduced. As Bitcoin started to catch on, people looked for more potent mining solutions.