What is Proof-of-work (PoW): how it works, mining, features
For the functioning of the blockchain and ensuring the functioning of the network in conditions of high security of the system, complex algorithms are used. Few people know, but many people wonder how Blockchain works and how life happens inside the cryptocurrency network. The blockchain is constantly generating new blocks with confirmed transactions, creating an inextricable chain of blocks with information. To protect the system from the uncontrolled creation of new blocks, new coins or other fraud, algorithms are used that can prove that the necessary calculations were performed to create the block. One of the most popular is the Proof-of-work (PoW) algorithm.
In order for the calculations to be performed and new blocks to be added to the Blockhain, in addition to solving problems, the result (hash) must be checked. In this case, the tasks should be quite complex, but at the same time solvable. The result itself should be easy to verify. After the result is checked by all participants (nodes / nodes) of the network and consensus is reached, a block is formed that is written to the blockchain.
Proof-of-work is an algorithm that requires you to do some work before entering information about transactions and blocks in the Blockchain. For the first time, the Proof-of-work algorithm was put into practice in Bitcoin by the creator of Satoshi Nakamoto. The entry will not be made until all participants confirm that all information is correct. To confirm the transaction, it is necessary to find the hash using the selection method. It is the miners who are engaged in the search for solutions to complex mathematical problems, confirm transactions and enter them into the blockchain. For this work they receive a reward.
kak-rabotaet-proof-of-workMany already know that cryptocurrency mining requires a lot of computing power. With the help of PoW, miners fight for the right to be the first to process transactions in order to get the appropriate reward for this work. The more power, the higher the chance of becoming the one who finds the block first. Simply put, the principle of Proof-of-work is that miners can receive a reward in the form of new coins, providing their power to find a solution (hash). The mathematical equations themselves are very difficult to calculate. Moreover, the complexity of the solution is independently regulated by the network. The difficulty level is important because the principle of PoW is very flexible.
Since the power, namely the number of miners, in the network will constantly change, namely increase, coins should be mined faster. Proof-of-work solves this problem by adjusting the level of complexity of tasks depending on the number of network capacities in real time. Thus, the block formation time does not change, which does not allow to produce coins faster than necessary. In the case of Bitcoin, the hash takes about 10 minutes. You need to make a lot of efforts to find the hash, but when it is found, check if it is correct should take a minimum of time and effort.Benefits of PoW
This is perhaps the biggest advantage of Proof-of-work. The more the blockchain network grows, the more new nodes appear in the system. So the overall computing power is growing. This makes the possibility of spam or Dos attacks virtually impossible. To establish control in the blockchain, hackers need to have control over more than 50% of the capacity of the entire network. An attack is possible in principle, but its implementation will cost fabulous costs and will be unprofitable.
In pursuit of the realization of their capacities, numerous armies of miners are fighting for the right to receive a reward. The advantage of PoW is the lack of control over the network of one or more nodes. Decision control is assigned to all participants at the same time.
Work for the good
The huge powers that are used in PoW mining can be applied in various fields of science or business. Many enterprises cannot afford to have such powerful computing equipment for testing. The advantage of Proof-of-work may lie in the distant future, where miners and corporations will work for the benefit of human development.
Disadvantages of PoW
The disadvantage of Proof-of-work is the increase in computing power, which leads to an increase in the complexity of tasks. This has a direct impact on miners because they need to constantly update their equipment in order to be competitive. In addition to increasing equipment costs, electricity costs will increase.
Mining Bitcoin has long been no longer a profitable activity for home mining, so some resort to another Proof-of-stake (PoS) algorithm. In the latter, there is no need to resort to computing power, since the operation of the system depends on the number of coins on the wallet. Crypto coins such as Ethereum and Neo use this protocol.
Matter of chance
PoW mining does not guarantee rewards. The hash is computed randomly, although the advantage is given to the one who spent the most resources. Thus, mining becomes profitable exclusively in pools.
Complexity is getting bigger, costs are growing proportionately. Miners gather in pools to increase the chance of receiving bonuses. Complexity will continue to grow, which means that small pools will also become unprofitable to exist. As a result, there is a high probability of creating a small number of heavy-duty pools that will control the functioning of the cryptocurrency network in the future.
We do not know whether this can be called a PoW disadvantage, but such an outcome is possible. If someone captures 51% of the power, they can control the entire blockchain, namely, confirm all transactions on their own. The reward will accordingly go to hackers. The outcome is extremely unlikely, but who knows what may happen in the future.
The future of PoW
Proof-of-work time-tested reliable protocol, which still did not give reason to doubt its reliability.
WEBSITE - https://hex.win/
TWITTER - https://twitter.com/HEXCrypto
FACEBOOK - https://www.facebook.com/HEXcrypto
TELEGRAM - https://t.me/HEXcrypto
GITHUB - https://github.com/bitcoinHEX
REDDIT - https://www.reddit.com/r/HEXcrypto/