Proof-of-Work is a blockchain consensus mechanism used to validate transactions and create new blocks on a proof-of-work blockchain. An example of a proof-of-work cryptocurrency is Bitcoin (BTC).
What Is Proof-Of-Work (PoW)?
This is a blockchain consensus mechanism that involves solving computational mathematical puzzles to validate transactions and create new blocks on a blockchain.
Just like regular digital fiat currency that needs a regulated central entity to keep track of every user and how much money they have, to avoid double-spending. Cryptocurrencies do not have that type of central entity since its controlled by no one, so the fact that it is not controlled by anyone had proof-of-work cryptocurrency came about, paving the way with the act of consensus mechanism for the maintenance of cryptocurrency in a decentralized manner.
What Is A Consensus Mechanism?
A consensus Mechanism is an act in which someone is there to maintain data whether to delete, update, replace, or deduct, to avoid the risk of double-spending. Consensus mechanism is very important in a digitalized funding system. In cryptocurrency, it ensures that a coin or token isn’t used or spent more than once.
Proof-of-work blockchain solves the risk of double-spending with a consensus mechanism. Consensus mechanism importance is to avoid the risk of double-spending. Double-spending means Samuel has $10 in his account and sends Tom $10 and still sends Edyme $10. Why? Well because there is no one to keep track of how much Samuel has in his account or validate if Samuel has just $10 in his account and no one to deduct the $10 from Samuel’s account immediately he sent the money to Tom.
Simply put, that is why consensus mechanism is very important. If there is double-spending in cryptocurrency it inflates the overall supply, makes the coin or token lose its value, and become worthless. Hence, the need for an act of validating transactions – PoW – Consensus mechanism.
Proof-of-work is the core process of adding new blocks to the blockchain. To add a new block to the blockchain, miners or validators will have to solve a mathematical puzzle. In the case of Bitcoin (BTC), this puzzle-solving is more like guessing, it is creating or guessing a hash that matches that of Bitcoin’s current target, which is a bunch of multiple zeros.
The probability of getting a hash that has multiple zeros at the front is very low and can be very difficult to find. But since miners across the world every second are making trillions of trials to get the right hash with multiple zeros at the front, the puzzle-solving takes about 10 minutes. Once a miner has solved this puzzle or gotten the right hash with multiple zeros at the front, the network approves it and the miner receives BTC as a reward.
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The key importance of Proof-of-Work on a blockchain is that it makes it extremely difficult to tamper with any part of the blockchain because to alter anything on the blockchain, it would require all blocks to be edited. And in the case of Proof-of-work that has a 51% attack, which means for anyone to be able to alter the blockchain, one will need to have 51% computational mining access to the blockchain, in the real world, that is a lot of hardware for one person or even an organization to own and would worth billions of dollars to own that amount of hardware.