10 Easy Facts About How To Make Money Mining Bitcoin Shown
But just how can you create a system Which 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 that in a Really creative way I like to call Who Wants to Be a Banker
In a nutshell, anyone who wants to take part 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 simple, right
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Of course, this guessing is done by your computer. The stronger your computer is, the more guesses you can make in a second, increasing your chances of winning this game. If you manage to figure 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 guess, your mining system determines which of the current pending transactions will be grouped together into the next block of transactions. Compiling this cube represents the 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 much like a Rubiks cube: The solution is very hard to achieve but quite easy to validate.
3. Every computer that validates your solution upgrades its copy of this Bitcoin transaction ledger together with the transactions that you opted to include in the block.
4. The machine generates a fixed amount of bitcoins (currently 12.5) and benefits 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. Each of the transactions in the block youve just entered are now confirmed by the Bitcoin network and are virtually irreversible.
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So thats Bitcoin mining in a nutshell. Its called mining because of the fact that this process helps mine new Bitcoins from the computer system. But if you think about it, the mining component 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 every block, a different miner will guess the number and also be granted the right to update the blockchain. Of course, that the miners with more 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 Read More Here that the further mining power the network gets, the harder it is to guess the answer to the mining math issue. So the difficulty of this mining process is really self-adjusting to the gathered mining power the network owns. .
If more miners join, it will get more difficult to solve the issue; if many of them drop off, it is going to get easier. This can be known as mining difficulty.
Now, remember, this is on average. We can have two cubes being added minute after minute and then wait an hour to the next block. In the long run, this will even out to ten minutes on average.
As you can imagine, this kind of self-adjusting mechanism has created a sort 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 out there. In reality, Satoshi, the inventor of like it Bitcoin, and also his friend Hal Finney were a few the only individuals 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 issue was low. Since Bitcoin began to catch on, folks looked for more potent mining solutions.