How To Make Money Mining Bitcoin for Dummies
But just how can you create a system Which 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 that in a Really creative manner I like to call 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 so. All you need is to suppose a random number that solves an equation generated by the computer system. Sounds easy, right
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Of course, this guessing is all done by your computer. The more powerful your computer is, the further supposes you can create in one second, increasing your chances of winning this game. 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 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 develop into a temporary banker of Bitcoin who has to upgrade the Bitcoin transaction ledger known as the blockchain. .
2. The block youve created, along with your solution, is sent to the whole network so other computers can validate it. Its a bit much like some Rubiks cube: The solution is very hard to attain but quite easy to validate.
3. Each computer that validates your solution upgrades its copy of the Bitcoin transaction ledger with the transactions you opted to include in the cube.
4. The system 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 issue.
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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 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 this transaction confirmation process. So that the name is a bit 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 form 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 due to the regulation of statistical probability, its highly unlikely that the 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 gets, the harder it is to guess try this the answer to the mining math issue. So the difficulty of the mining method is actually self-adjusting into the accumulated mining capability the network possesses. .
If more miners join, it is going to get more difficult to address the problem; when many of them fall off, it will get easier. This is known as mining issue.
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 will even out to ten home minutes on average.
As you can imagine, this kind of self-adjusting mechanism has made a sort 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 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 powerful mining solutions.