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Response to wasupaloopa (Reply #9)

Tue Dec 4, 2018, 10:19 PM

72. Here's the short answer

Bitcoin maintains a public ledger of all transactions. This means it's decentralized, not dependent on banks to coordinate and guarantee transactions.

But how does everyone agree that the public ledger is legit and doesn't contain fake entries? Bitcoin mining. Bitcoin users get together and pool their computing resources to solve certain very difficult mathematical problems to "sign" entries in the ledger. This is called mining. Each signed entry includes a reference to the transaction block before it. Therefore, in order to create a fake entry, you would need to have enough computing resources not only to sign your fake transaction block, but also to sign all subsequent blocks up to the immediate present time, thus creating a new transaction chain linking backward to your forged transaction. This requires an extraordinary amount of computing power, and bitcoin depends on the fact that a majority of the computing power on the network will always be signing legit blocks, therefore guaranteeing that it is impossible to go back and fake or modify transactions.

So what's the incentive for Bitcoin miners? Every time they solve a signing problem, they get paid a small commission in Bitcoin. So if they mine enough, they can make money -- as long as Bitcoin itself still has value.

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