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Mining OEMs, large-scale mine operators, and mining-related service providers will accumulate the vast majority of wealth created by Bitcoin and other cryptocurrency networks during the issuance period, despite expending far fewer human resources than the software developers who volunteer contributions.For context, these 'coins' aren’t 'stored' on any device. Bitcoin is a distributed public ledger, and owners of Bitcoin can access and transmit their Bitcoin from one digital address to another digital address, as long as they have their private key, which unlocks their encrypted address. Owners store their private keys on devices, or even on paper or engraved in metal.bitcoin mail cryptocurrency trade ethereum регистрация bitcoin etherium bitcoin google bitcoin etherium coinmarketcap bitcoin bitcoin hosting bitcoin код bitcoin xpub зарабатывать bitcoin ethereum dao рулетка bitcoin mooning bitcoin сайт bitcoin bitcoin location sun bitcoin tx bitcoin 99 bitcoin Ethereum blocksethereum википедия bitcoin мерчант bitcoin flapper india bitcoin decred ethereum программа ethereum daemon monero bitcoin anonymous 6000 bitcoin jax bitcoin
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How are Transactions Confirmed on the Blockchain?
You might remember how I explained earlier that the blockchain is decentralized, meaning that no single authority has control over the network. This also means that the blockchain does not need a third party intermediary to confirm a movement of funds.
If that’s the case, how are transactions confirmed? This is where things get really interesting!
The blockchain is a community-based platform, meaning that in most cases, anybody can contribute to the network to help verify transactions. They do so by contributing their computational power, which in return, is able to support the network.
Not all blockchains use the same technology to do this, but we differentiate the process by how the network reaches “consensus”. Consensus basically means “How does the network know that the transaction is valid and that the user actually has the funds available?”
Blockchains reach consensus by following the rules of “cryptography”, which is where the term “cryptocurrency” comes from. Cryptography is a really advanced area of mathematics that is based on algorithmic puzzles.
When the blockchain and its community of volunteers are able to solve the algorithmic puzzle, the rules of cryptography state that a transaction is valid and authentic. However, different blockchains use different methods to solve the puzzle, which is known as a “consensus mechanism”.
Confused? Don’t be, as my “What is blockchain” guide is now going to give you an example!
The blockchain Bitcoin uses is supported by a consensus mechanism called “Proof-of-Work” (PoW). The puzzle is so difficult that no human being could solve it on their own, which is why people need to use their computational power instead.
Every computer that is connected to the network (called a “Node”) attempts to solve the puzzle as quickly as possible. Whoever solves the puzzle first, gets a reward – free, new Bitcoin. However, in reality, the Bitcoin reward is not free, as the user had to use their surplus computational power, which consumes lots of electricity!
PoW is just one example of how a blockchain reaches consensus. There are many others and I have listed some of them below (there are lots more)!
PoS (Proof of Stake)
DPoS (Delegated Proof of Stake)
PBFT (Practical Byzantine Fault Tolerance)
DAG (Directed Acyclic Graph)
Are you still asking yourself “What is blockchain”? I hope not! The next part of my blockchain tutorial is going to talk about why decentralization is important!
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