Proof-of-Work For Newbies
January 5, 2019 12:47 pm
What is Proof-of-Work?
Proof-of-Work, also known as PoW is the original consensus algorithm that s present within a Blockchain network.
Blockchain requires a pre-defined algorithm to create new blocks on the chain and for confirming transactions. Miners compete for rewards for completing transactions. In order to send digital currencies over a network, Proof-of-Work is required. All the transactions as blocks on a decentralized ledger.
Through a process called mining, the transfer and verification of transactions is carried out. Miners use the computing power of their CPU and GPU to solve complicated mathematical puzzle in an attempt to prove the solution.
A computer-generated puzzle that requires a substantial amount of computational power to solve.
Here are some commonly used puzzles
- Hash function
- Integer Factorization
- Guided tour puzzle protocol
The answer to a Proof-of-Work problem is called a hash. The solving difficulty increases as the network grows, yielding fewer rewards while commanding higher power requirements.
The reason that the mathematical puzzles are complex and difficult to solve is due to security issues. Having a secure system prevents unwanted DoS attacks, spam protection and makes it the system less-prone to vulnerabilities.
While factors such as the number of users, current power and network load play a significant role in mining. In simple terms, Miners solve the given puzzle to form a new block and confirm ongoing transactions.
Application of Proof-of-Work
Proof-of-Work is largely used in cryptocurrencies. Bitcoin is the most popular implementation of Proof-of-Work, it helped in laying down the foundation of this consensus algorithm.
Ethereum is another major implementation of Proof-of-Work.
Expenses: Mining requires specialized computer hardware for running algorithms. Moreover, the setup is an initial investment, while the electricity is a major cost.
Utility: The expenses and energy that goes into mining are significant. The downside here is that these calculations have no use outside the scope of mining.
51% attacks: If a user or a group controls more than half of the mining power, the blockchain network can be hacked and ledger entries can be manipulated, giving way to reverse transactions and double-spending attacks.
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