A lot of people are unfamiliar with the term proof of work. Proof of work is an essential part of a cryptocurrency system. It is used to enforce following the rules. In this article we will use Bitcoin as an example but proof of work can be used in many other applications.
If you have been involved in a blockchain technology then you might have heard the words proof of work or PoW. PoW is one among the five consensus methods used by cryptocurrency to verify transactions and add it to the blockchain.
I know you are searching for What is proof of work? You are at right place here I explained proof of work in detail with easy to understand example. Also if you want to learn what is proof of work in blockchain?, what is proof of work bitcoin? here you will get answer of all your questions related to Proof Of Work with proof of work examples.
Cryptocurrencies like Bitcoin use Proof Of Work algorithm to validate the blockchain transactions to solve the problem of double spending. So you should need know about proof of work and how does it work.
What Is Proof Of Work?
Proof of work is very first consensus mechanism and the biggest crypto model Bitcoin still uses it and also it is the leading model for the crypto community. So before knowing about proof of work let’s understand about consensus mechanism.
What Is Consensus Mechanism?
In a normal database a single person of a computer owns and take care of all the data. No one else has access to that data which means if that person want they can delete the data or make changes in that data according to them.
But blockchain this is completely different being what is called a distributed ledger this technology what we call self governing which means there is not one person who control it or make changes. Instead contribution comes from all the hundreds or thousands of users who participated in the network to make it function properly.
If any one person trying to cheat on system that can quickly removed or declared as fraud by rest of people on the network that are checking them this the first benefit of a consensus mechanism. In an ever changing system like blockchain you need a reliable, fair, real-time, efficient, and transparent mechanism that will ensure the transactions are executed and genuine and that there’s is something called consensus on a network.
Now if your curious what consensus means? It means that everyone is on the same page. Let’s understand this with an example.
Let’s suppose that a person who’s name is Adam pays $10 to some other person who’s names is Eve. We want to make sure that everyone knows that what actually happened and also Adam’s account goes down $10 and Eve’s goes up $10.Proof of work is the one way to make sure that everyone has the same database that they reach consensus.
In the blockchain instead of one person have all the the database everyone on the network has it. They have their on log for what actually happened this way the information is public and it can’t be frauded or controlled by one authority.
Now we have an idea that what consensus mechanism is so now let’s dive into proof of work.
What is Proof Of Work?
It solve the problem of everyone having the same record. In technical term proof of work is an algorithm that uses a significant of efforts to deter or eliminate fake uses of computing power.
It was launched on bitcoin network in 2009 to solve the problems of double spending. Which if unchecked could be a major issue for crypto projects.
Now you wonder that what is this double spending?
Double spending is the risk that a cryptocurrency can be used twice or more. Transaction information within a blockchain can be altered if specific conditions are met. The conditions allow modified blocks to enter the blockchain; if this happens, the person that initiated the alteration can reclaim spent coins.
Verifying double spending on a centrelized system is very easy because that is controlled by one person so that person easily verify that transaction. But it is very difficult to solve this problem on blockchain when millions of people have their own records.
Now let’s go to the next section and learn how proof of work system works?
How Does Proof Of Work Works?
Let’s understand with bitcoin. It is like every other crypto project is blockchain based. This technology is tasked with the responsibility of storing information permanently and safely. As the name implies blockchain comprises blocks which are verified and then added to the network’s chain and each bock contains information about recent transaction which is happening on blockchain.
So basically what a block is? It is just a list of transaction in a specific time period which are done on blockchain. Which means you can easily track every single penny on blockchain and every block is tied to the previous block which makes it a chain.
Now you wonder how these blocks are created on blockchain?
Crypto miners are using their computers to participate in the network to add new blocks execute proof of work each time that a new block is added and it takes approximately 10 minutes on bitcoin network for miners to find the wining proof of work to validate the transaction. I wrote a complete guide about cryptocurrency mining you can check that out.
Now you might wondering what actually happing when a bitcoin block gets mined or validated? Well it is a actually really difficult guesswork there are essentially a ton of computers around the world guessing randomly until they hit that block’s password and then it’s verified.
These password’s can’t be predicted but they only can be guessed and you can check it very quickly thought to make sure that it is the right password.
So by figuring out this really difficult password of a block we can be sure that you spend lot of time to guess and check it and this where proof of work comes in you have proof that you spend a long time trying to find the password that works so you get a reward which is certain amount of bitcoin. The the transactions in that block are validated and the record of everyone on the network are updated to the new blocks.
This randomly password guessing test is actually is hash function it’s is very important to proof of work. So now let’s take look and understand what is hash function?
what is hash function?
Hash function is basically an authentication function that is extremely useful and appear in almost all information security applications. It’s a process of converting an input of any length into a fixed size strig of text using a mathematical function.
This mean any text, no matter how long it is can be converted into an array of numbers and letters through an algorithm and this algorithm is called hash function.
To learn more about hash function in cryptocurrency watch below video.
Amazing Features of Proof Of Work Mechanism
- It is highly secure system
The purpose of integrating this system into a crypto project is to offer a reliable, safe, fair, and transparent system that will form a consensus based on network participants contribution. So proof of work like any mechanism consensus is secure.
Misbehavior from a miner on proof of work mechanism may result in being cutoff from attempting to add new blocks in future. Also carrying an attack on system would take ton of money and computing power.
Ex. To create a fraud transaction you would need to control 51% of the network’s power which is cost you hundreds of billions of dollar and because it’s so expensive to make a single fake transaction we ca assume that it’s safe and secure.
Crypto miners broadcast the details of a transaction when the add new block to the network now once this broadcast is made nodes leave what they are doing and the double check the transaction to ensure that the asset to be transferred has not been double spent.
Some Problems Of Proof Of Work
- Bad impact on environment: According to an article of BBC news bitcoin mining consume electricity equal to Netherlands.
Also with the time this energy consumption will increase when more people join the network and start mining crypto currency. This data if about bitcoin only if we talk about energy consumption of Proof of Work in all cryptocurrencies then it’s huge.
- Inability to scale: Crypto market is growing rapidly and it opened up opportunities for us to make real money either as traders or miners and with a 24 hour trading volume around 50 billion dollars the market is booming. But remember one block is solved around every 10 minutes and these block do have a transaction limit so at peak times the fee to send money over proof of work blockchain can be very high even more than the money you want to send.
Crypto Projects Powered By Proof Of Work
The largest project that uses POW is Bitcoin and after that Ethereum. There are some other project like Litecoin, Monero, Bitcoin Cash, D Cash, Z cash, and many other cryptocurrencies uses proof of work.
However Ethereum is now planning to shift from proof of work to proof of stake.
Conclusion – What is Proof Of Work
Proof-of-work is based on the assumption that vast amounts of effort are required to find a solution. The work in this case is done by miners, who are often GPU’s or CPU’s that try to solve the block. This requires them to do some very hard number-crunching indeed – so hard, in fact, that it would not be cost effective for a hacker to stage an attack and change the transactions within. Hence proof-of-work represents a second line of defense against cyber attacks, after cryptography.
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