Incentives

Why does everyone spend resources doing the calculation when they know that someone else will calculate and announce it to them? Why not sit idle and wait for the announcement?

Great question. This is where the incentives come in the picture. Everyone who is the part of the Blockchain is eligible for rewards. The first one to calculate the sealing number gets rewarded with free money for his efforts (i.e. expended CPU power and electricity).

Simply imagine, if #5 calculates the sealing number of a page, he gets rewarded with some free money, say $1, that gets minted out of thin air. In other words, the account balance of #5 gets incremented with $1 without decreasing anyone else’s account balance.

That’s how Bitcoin came into existence. It was the f...

I'm Jimmy Song from Austin, Texas and currently a Venture Partner at Blockchain Capital LLC.

I'm a Bitcoin Educator, Developer, Entrepreneur and currently the top writer in Bitcoin on Medium. You can check out some of my writings on Medium here or follow me on Twitter here.

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