UNDERSTANDING CRYPTO MINING Pt2.2 (consensus mechanisms-Proof of Work [PoW])
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The basic objective of the #blockchain technology is to create a secure and more efficient way of trading and transferring value. To achieve this, the blockchain substitutes the current system of having a centralized ledger held under trust by third institutions such as banks and credit card companies, with one, in which one ledger containing all transaction records is broadcast publicly over a network and maintained and validated by several computers (nodes) on the same network. This would eliminate the concern of trusting a middle man as well as reduce the costs incurred as a result of the middle man particularly for cross boarder transactions, it also removes the need to trust a third party who may have vested interests with validating transactions.
The implication of this concept of decentralized public ledger is that everyone and anyone had access and control over the #ledger, so how then do you ensure that everyone is stays honest?. To answer this, developers build consensus algorithms<> into the programming of blockchain networks, to govern how the ledger should be validated and maintained.
The PoW is one of such algorithms utilized by #Bitcoin and several other crypto currencies to validate and secure the network.
This mechanism is not unique to #crypto currencies or the Blockchain, in fact it has been utilized by a number of service providers on the internet long before its incorporation into the blockchain tech world. One popular example is hashcash. #PoW achieves consensus for its ledger by requiring miners (nodes/computers that dedicate their computational power towards maintaining the ledger) to prove that they have expended their computational resources in order to earn the right to validate a block of transactions.
With #bitcoin, miners are required to carry out a time consuming, and computation expensive series of calculation, that requires guessing millions of numerical inputs, until a unique number with certain characteristics relative to the current block of transactions is produced. This computing process is called hashing. Hashing is so computationally difficult that the entire bitcoin mining network, which currently consumes as much power as the whole of Ireland, can only find one of such unique number every ten minutes. The bitcoin network constantly increases the difficulty of the hashing process as more miners join the network. This stabilizes the rate at which new coins are minted, and also restarts the whole process with different criteria after each block has been validated so that no miner can have an unfair advantage.
The proof of work Mechanism is highly secure against fraudulent attacks. The only way to defraud the network would be to own 51% of the total mining power which would be too expensive. The downside however is that it is highly energy consuming and may not be sustainable over time unless a greener power supply alternative is invented.
Though it has its flaws, PoW provided a solution to a problem that was seemingly impossible to solve. Bitcoin is the most popular crypto that employs PoW to achieve consensus but #Etherium, #Dogecoin, #bytecoin, and monero also use it to secure their ledger.
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Also stay tuned for my next article where i explain Proof of Stake (PoS) and more..
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