We have heard about Blockchain and how it works but we then need to learn about the first consensus mechanism, Proof of Work.
PoW is a blockchain-based algorithm that secures many cryptocurrencies like Bitcoin and Ethereum. The concept was subsequently adapted to securing digital money by [Hal Finney](en.wikipedia.org/wiki/HalFinney(computer_scientist)#:~:text=Harold%20Thomas%20Finney%20II%20(May,developer%20on%20several%20console%20games.) in 2004 through the idea of "reusable proof of work" using the SHA-256 hashing algorithm.
Proof of Work is the original consensus mechanism of cryptocurrencies and was first used by Bitcoin. It is decentralized and requires members of the network to spend effort solving an arbitrary mathematical puzzle to prevent anybody from lying to the system. This is why the network requires a lot of processing power. This processing power is offered by the miners who are in charge to validate transactions and mining (generating) new tokens.
To understand what PoW is, we are gonna use an example which is quite related, mining:
We all know that to find gold we must look for a place where there can be gold and then start mining. If you go alone and I go with some friends fully prepared we have a lot more probability to find gold than you do. The more people I can get to join my team, the more I increase my probability of finding gold. That is how new Bitcoins are created, by miners.
Now, let's talk about miners:
Miners are the ones who make possible that the Bitcoin network works because they are spending their processing power (computational power), like GPU (Graphics Processing Unit, these are the Graphics Card that you buy to play video games on a PC), to be the first to solve the math puzzle
The probability of mining a block is determined by how much computational work is done by the miner. The winner gets to update the blockchain with the latest verified block full of transactions and is rewarded by the network with a predetermined amount of crypto, in this case, we are talking about Bitcoin so this is how new Bitcoins are created.
Here you can see the whole process:
MINERS: Miners start racing to solve the math puzzle
SOLUTION: One miner solves the math puzzle
VALIDATION: That miner validates the new block and then this block gets into the blockchain
REWARD: That miner is rewarded for solving the puzzle and validating the block by spending its computational power
Proof of Work has more benefits. Due to proof of work, Bitcoin and other cryptocurrency transactions can be processed peer-to-peer in a secure manner without the need for a trusted third party. This means we could make a transfer and the whole network would approve it, not a third person but the network.
Also, double-spending is an issue for online transactions because digital actions are very easy to replicate, which is what makes it easy to copy and paste a file or send an email to more than one person. With Blockchain technology if you are gonna send some money, before you can make the transaction the network (miners) verify that you have the amount needed for that transaction.
To finish this article, I'm gonna say that Proof of Work at scale requires huge amounts of energy, which only increases as more miners join the network. So it would be good if we had a consensus as good as PoW but without the need of using so much energy. We are gonna talk about this in the next article! So, stay tuned for more!
As always, really hoped that you liked it and learnt something new! If you have any feedback, doubt or any topic you would like me to write about don't forget to let me know!