How To Make Money Mining Bitcoin for Beginners
But how do you create a system that has a decentralized ledger How can 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 very creative manner I love to call 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 this. All you need is to suppose a random number that solves an equation generated by the system. Sounds easy, right
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Obviously, this guessing is done by your computer. The more powerful your computer is, the further supposes 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 right suspect, your mining system determines which of these 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 update the Bitcoin transaction ledger known as the blockchain. .
2. The block youve generated, 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 quite hard to attain but very easy to validate.
3. Every computer that validates your solution updates its copy of the Bitcoin transaction ledger together with the transactions you opted to include in the cube.
4. The system generates a fixed 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 this page which were attached to the transactions you inserted into the next block.
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6. Each of the transactions in the block 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 because of the simple fact that this process helps mine new Bitcoins from the computer system. But if you think about it, the mining part is merely a by-product of the transaction confirmation process. Therefore that 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 form of guessing, for every block, a different miner will guess the number and also be granted the right to update the blockchain. Obviously, the miners with computing power will succeed more often, but on account of 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 rules for mining in a manner that the more mining energy the network gets, the harder it is to guess the answer to the mining mathematics issue. So that the difficulty of this mining process is actually self-adjusting into the accumulated mining capability the network owns. .
If more miners join, it is going to get harder to solve the issue; when many of them drop off, it will get easier. This is known as mining issue.
Now, remember, this is on average. We can have two cubes being inserted minute after minute and then wait an hour to the next block. In the long run, this may even out to ten minutes on average.
As you can imagine, this kind of self-adjusting mechanism has made a type 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 lot of miners on the market. In reality, Satoshi, the inventor of 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 difficulty was low. As Bitcoin started to catch on, people looked for more powerful mining solutions.