How To Make Money Mining Bitcoin for Dummies
But just how can 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 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 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 all done by your computer. The stronger your computer is, the more supposes you can create in a second, increasing your chances of winning this match. If you manage to figure 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 computer comes up with the right 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 gets 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 similar to a Rubiks cube: The solution is quite hard to achieve but very easy to validate.
3. Each computer that validates your solution upgrades its copy of this Bitcoin transaction ledger with the transactions you chose to include in the block.
4. The machine generates a fixed amount of bitcoins (currently 12.5) and rewards them as compensation for the time and energy you spent solving the math problem.
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5. Additionally, you get paid any transaction fees his explanation which were attached to important site the transactions you inserted into the next block.
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6. Each of the transactions in the cube youve just entered are now confirmed from the Bitcoin network and therefore are virtually irreversible.
What Does How To Make Money Mining Bitcoin Mean?
So thats Bitcoin mining in a nutshell. 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 goal 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 each block, a different miner will guess the number and also be granted the right to update the blockchain. Of course, the miners with 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 energy the network has, the harder it is to imagine the answer to the mining math issue. Therefore the difficulty of the mining method is actually self-adjusting to the gathered mining power the network owns. .
If more miners join, it will get more difficult to address the problem; when many of them fall off, it will 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 for the next block. In the long run, this may even out to ten minutes on average.
As you can imagine, this type of self-adjusting mechanism has made 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 great deal of miners on the market. In fact, 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 reduced. As Bitcoin began to catch on, people looked for more potent mining solutions.