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Strategies & Market Trends : Blockchain
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To: T'Munney who wrote (73)12/27/2017 7:17:19 PM
From: Elroy1 Recommendation

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roguedolphin

   of 831
 
Could you expound on how <<Whoever creates the next block gets a reward in Bitcoins, I think the current block reward is 12.5 Bitcoins?>


I don't know exactly how it works, but it's something like this. Maintaining and running the network in Bitcoin is called mining. Computers/servers that are managing the network are doing a few things - gathering new transactions as they come in, entering them in the "next block" and also trying to solve some difficult crypto graphic problem. The server that solves the problem first gets to create the next block, which is full of all the transactions that have occurred since the previous block was created, and that new block gets added to the permanent unchangeable distributed Blockchain. As a reward for creating the next block, that server/node gets 12.5 Bitcoin.


I don't know how the next block then propagates from that one node to all the nodes in the network, but somehow it does.


Miners manage and run the network, and in return they get transaction fees (some amount of bitcoin per transaction of any kind) and reward bitcoin for creating the next block.


Currently the bitcoin transaction fees are insanely high - maybe $10-$20 per transaction. This is because the global bitcoin network has become so congested that having all these nodes communicate with each other and do all this stuff properly has become prohibitively costly in terms on computing power. Many of the recent forks (Bitcoin Cash, Bitcoin Gold, etc.) are designed to alleviate the Bitcoin network congestion problem.


I don't completely understand this stuff, but it's something along those lines.


For normal users the key things to know are


1- any Bitcoin transaction costs a lot, so moving less than $500 (maybe even $5,000) around the Bitcoin network is not a good idea because fee transaction fee will eat to much of your capital.
2- The blockchain works. So if you've got your private keys, you control your Bitcoin, they aren't going to get lost due to some computer failure. If someone else gets your private keys they control your bitcoin (and likely take it), but the loss their is your fault, not the fault of the network.


#2 sounds easy, but it's not. Everyone I know relies on external wallet makers to manage their keys, and we just assume these external wallet makers know what they're doing.
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