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Blockchain – Proof of Work (PoW)

In this tutorial, we are going to learn about the Proof of Work (PoW), its origin, how does it work, benefits, and disadvantages.
Submitted by Vaishnavi Srivastava, on January 22, 2022

Bitcoin is the world's first and most popular cryptocurrency. It is a kind of digital currency that tracks transactions without using a central bank. Bitcoin's basic consensus mechanism is the Blockchain Proof-of-Work (PoW), a consensus method for the blockchain network. A consensus mechanism is a fault-tolerant algorithm used by computers and blockchain systems to achieve the necessary consensus between a distributed process or multi-agent systems such as cryptocurrency, for a single data value or single network state.

Proof of Work (PoW) is a mechanism to secure digital transactions without third parties. PoW involves community members working together to solve complex puzzles. This action expands on previously solved puzzles. As a result, PoW is a way to verify both current and previous transactions.

Proof of Work (PoW) on the blockchain is the oldest and most widely used consensus method. The ability to promote honesty in a decentralized environment is a major reason for its reputation.

Origin of PoW

Before the creation of the Bitcoin network, a PoW consensus was established. The PoW method was first published in 1993 in an essay by Moni Naor and Cynthia Dwork on combating DoS attacks. Before Satoshi Nakamoto discussed PoW methods on the Bitcoin blockchain, computer scientist and crypto activist Hal Finney (Harold Thomas Finney II) developed another system in 2004 called RPoW, a Reusable Proof-of-Work. It was a system that worked by receiving a Hashcash-based Proof-of-Work token that is non-exchangeable or non-fungible. In return, he created RSA-signed tokens that could be transferred from one person to another.

How does Proof of Work (PoW) work?

PoW is a difficult and expensive data type to create, but easy to verify once created. Many discuss this data as if it were a solution to a mystery. Basically, community members work together to solve difficult puzzles. Miners must complete very complex equations to generate data or solve mysteries. A new answer basically confirms the previous work, since all attempts at the equation depend on the old solution. At the same time, new data is created with the effort required to answer the equation. This information is then fed into an evolving data chain. Then the process actually starts all over again.

Benefits of PoW

1. Keep a safe distance from DDoS attacks.
2. Fairness and transparency are important.
3. The small amount of crypto held by miners has a limited impact.
4. Encourage public participation to maintain healthy networks.

Disadvantages of PoW

1. Buying professional computer equipment, peripherals, and electricity is expensive.
2. It's an extremely difficult task, used only for checking blocks, with no benefit for studying or daily work. As a result, blockchains are more centralized than decentralized.
3. Mining will become less popular as rewards become less attractive.

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