introduction
Bitcoin miners collect and broadcast transactions in a block and validate them. Then they apply the cryptographic hash function of the header of the previous block to the new block. Finally, they try to solve the Proof-of-Work problem. Satoshi Nakamoto adopted a proof-of-work (PoW) consensus mechanism to solve the problem of the Byzantine generals, creating a transparent and objective protocol.
What is Proof of Work (PoW)?
Proof-of-work is verbatim proof that work was done to validate network transactions and create new bitcoins. It is a consensus mechanism and algorithm that uses computing power to verify transactions and add them to the Bitcoin blockchain. This mechanism allows the Bitcoin network to be trusted and remain decentralized.
PoW solves the problems of Byzantine generals, which may crash the distributed computer system due to various reasons, not just malicious nature, but maybe a software flaw, hardware malfunction, or a well-coordinated attack by a bad actor. They can all be difficulties that prevent nodes from reaching consensus on distributed networks.
The problem of Byzantine generals is common only in decentralized regimes, where agreement is difficult to reach.
Bitcoin solves the problem of the Byzantine generals by providing a way to communicate and transfer value securely without having to trust each other through a network of nodes that agree on the truth before it is timestamped. Once one node registers a transaction, a copy is propagated to all other nodes in the network. Proof of Work was created to achieve this goal.
Why is proof of work important?
Proof of Work is often misunderstood or underestimated, as many consider it wasted effort in bad system design; They claim that entering a transaction on any other digital ledger can be done instantly and effortlessly. This is why proof-of-work is essential to ledger security and how it prevents any party from compromising it. However, no effort is wasted if it enables the network to be an alternative to the current monetary system and its various drawbacks.
The importance of proof-of-work lies in its ability to act as a tangible expense for generating bitcoins and maintaining their credibility. It would be an exaggeration to carry out a 51% attack on the Bitcoin network with the aim of creating fake coins or executing fraudulent Bitcoin transactions. If any entity attempts to hack the Bitcoin network, it will have to return all previous Proofs of Work fast enough to bypass the ongoing PoW. For this reason, Bitcoin has it The cost cannot be faked The properties are immutable because it is almost impossible to change confirmed transactions.
To maintain stability in the Proof-of-Work system, Nakamoto implemented a simple yet ingenious solution referred to as the Difficulty Adjustment Algorithm, which regulates the difficulty level of discovering a new block every 10 minutes. This is crucial to prevent discovery of new blocks from happening too quickly as more miners join the network. It also ensures that the mining process does not become too slow if the mining activity decreases.
Proof of work vs proof of stake
We’ve seen how Proof of Work is a good use of energy to secure Bitcoin while forcing everyone to stick to the same immutable rules, including prohibiting the issuance of more Bitcoin to increase the supply.
The security difference between the two compatibility mechanisms is of great importance. Proof of work requires energy consumption to ensure that Bitcoin maintains its position as the most secure network worldwide, while Proof of Stake (PoS) does not solve the problem of potential interference from malicious entities. Instead, PoS sacrifices security for scalability, making it a faster, albeit untrustworthy, blockchain. Bitcoin’s PoW consensus mechanism is expensive, and it incentivizes participants to only post truthful information.
Proof of stake is the consensus mechanism for most cryptocurrencies, cryptocurrency stocks, and other Ponzi schemes marketed as alternatives to bitcoin. Its consensus mechanism works through “staking,” which requires investors to lock the tokens of the chosen protocol into the system so that the token cannot be spent. However, the higher the number of tokens stacked, the higher the chance that the transaction block will be verified.
Considering that most altcoin tokens are released to insiders and developers before they become available to the public, it is easy to see how poorly designed decentralization is in Proof of Stake networks.
The basic differences between the two mechanisms are highlighted here:
Proof of work
- Verification is performed by a network of miners
- The competitive nature uses a lot of energy and computational power to determine the probability of finding a new block
- Proof-of-work has a real physical cost of production, which insulates the network from attack
- There is an economic and environmental advantage to proof of work
Proof of stake
- It is validated by participants who provide their tokens as collateral
- Less power is used, but the amount of bet or the number of coins determines the probability of validating a new block
- Proof of stake has no real-world production cost, which makes the network vulnerable to attack
- There is no Proof of Stake environmental advantage
In Proof of Stake, it’s easy to get a 51% stake and then change the rules of the protocol to one’s advantage, and it’s relatively easy to censor network participation and activity, such as denying a person or entity’s transactions by not including them.
How does proof of work work
PoW was previously achievable with CPUs and GPUs. However, due to the huge amount of electricity required, it can now only be implemented using specialized computers run by miners, known as application-specific integrated circuits (ASICs), which feed transaction data, information from the previous block header, and a random number (nonce). ) to guess the result of the hash functions.
Hash functions are mathematical functions. In Bitcoin, SHA-256 is the hash function algorithm that converts the input data – anything that can be represented in ones and zeros – into the output, a string of 64 characters, which will be unique and completely associated with the input data.
With the way it works, it’s impossible to tell an output from audience-visible input other than a quick, costly guess made by an ASIC.
On the other hand, miners want to improve their work. To be profitable, they have to increase the number of hashes (or guesses) per second that their machines can produce while using the cheapest and most reliable power source.
Bitcoin difficulty adjustment makes mining a more competitive industry. In simple terms, PoW is like buying lottery tickets with a prize draw every 10 minutes. The more tickets you buy, the higher the probability of winning the lottery. According to ASIC terms, the Bitmain Antminer S19j Pro can run at 104TH/sec, which basically means 104 trillion guesses or tickets per second.
Due to increased competition, it has become more difficult for sole or individual miners to mine bitcoin since 2012, when ASICs became a necessity. However, they can now join a mining pool to increase their chances of getting rewards in bitcoin, although the money will be divided among the pool members.
Advantages and disadvantages
Proof-of-work is essential to keeping Bitcoin always secure, immutable, and decentralized. Here are the primary benefits and drawbacks of the Bitcoin consensus mechanism.
Advantages
- Decentralization, that is, the real breakthrough of technology
- Resistance to censorship as a result of decentralization
- immutability, the blockchain is almost impossible to reverse
- It is a fair and objective system based on strong protocol rules and physical laws
- High level of security: PoW economically incentivizes miners to protect the network
- Carbon and Methane Capture: Bitcoin exploits wasted energy to issue more coins and verify transactions
- By monetizing energy, PoW accelerates the deployment of renewable energy grids and improves load balancing on existing grids, making them more efficient and secure.
cons
- Slower transaction speeds
- Mining expenses (OPEX & CAPEX) are very high but necessary for proof of work
- PoW consumes a lot of energy, but this has been shown to encourage innovation in renewable energy sources and the exploitation of waste energy
Criticism of proof of work
Criticism of Bitcoin’s energy consumption is common. Since Bitcoin requires a great deal of energy to protect the network, proof-of-work is an easy attack vehicle by those whose interests align more closely with the pre-existing monetary financial system.
However, the pervasive narrative fails to acknowledge that Bitcoin is, in fact, driving innovation in technology that generates clean energy and exploits wasteful energy.
how? Bitcoin miners need to find the most cost-effective energy sources to make a profit. As a result, the affordable energy for bitcoin mining is increasingly coming from renewable energy sources, as well as from wasted and “stranded” energy sources, rather than relying on fossil fuels.
Renewable sources
Since renewables – primarily wind and solar – are among the cheapest sources of energy, bitcoin miners are incentivized to support their innovations, for the benefit of all.
Many misunderstand that energy consumption does not directly result in CO2 emissions, but that the source may. The impact on carbon emissions comes from energy production, not consumption.
wasted energy
Burning natural gas is an example of wasted energy: to avoid the high costs of transporting natural gas from remote locations, it is recommended that the oil companies that produce the gas either release the gas into the atmosphere or literally “flare” it to reduce environmental impact. However, burning it safely also comes at a cost, and if gas drillers can use a gas generator to power bitcoin miners, that wasted energy is turned to a good use — bitcoin production!
stranded energy
Since bitcoin mining operations can be located anywhere in the world, they are increasingly attracted to “stranded” energy, often far away from populated areas, such as ocean currents or the desert sun. Biogas is another such option, which produces reliable power, but is often not connected to the grid.
Frequently Asked Questions
How is the difficulty level of a PoW problem determined?
Depending on the number of hashes per second being mined on the network, the complexity of the hashing function will increase or decrease accordingly so that it takes miners an average of 10 minutes to find a new block across the global network.
Can brute force solve the proof-of-work problem?
The only way to solve a Proof-of-Work problem is through brute force, which is a general problem-solving technique, an algorithmic model that looks through all possible solutions to a given problem before finding the most satisfactory one.
What happens to proof of work when all bitcoins are mined?
When all of the bitcoin has been mined, proof of work will still be required to validate transactions, for which miners will charge a fee.
Are there any viable alternatives to proof of work?
To produce a decentralized, immutable, censorship-resistant, and secure cryptocurrency like bitcoin, there is no secure alternative to proof-of-work.
What happens if two miners solve a proof-of-work problem for the same block at the same time?
The block that appears in the longest chain will be chosen, the one that has the “greatest combined difficulty” of the hash used and requires the most computational power to create.
The last word
Politicians and intentionally misleading organizations have an advantage in criticizing Bitcoin’s proof-of-work and funding projects to discredit Bitcoin for its energy consumption. The advantage is to keep the current system as it is, and beneficial to them, under the guise that Bitcoin is wrong and harmful to humanity and the Earth.
bitcoin down; It is the hope that humanity needs and must be discovered and understood in order to be fully appreciated. Proof-of-work is necessary to enable the transition to a new monetary system and a different world, and the effort required to produce it makes it all the more worthwhile.
