What is proof of work?
Proof of work is a consensus mechanism that requires a significant amount of computing power from a network of devices. It is a process in which computing power is used to solve a mathematical problem to confirm the validity of transactions and add a new block (stores transactions) to the network. This concept was created by Hal Finney in 2004. 160-bit hash algorithm (SHA-1). Five years later in 2009. Satoshi Nakamoto, the unknown creator of Bitcoin, implemented Finney’s idea into his invention. Finney later became the recipient of the first Bitcoin transaction, in which he received ten bitcoins.
Source: cointelegraph
Proof of work and mining
Proof-of-work has several main advantages, especially for a relatively simple but extremely valuable network like Bitcoin. Proof of work is a proven and secure method of maintaining a decentralized blockchain. So far, no more effective way has been found to maintain the same degree of decentralization as with Bitcoin with another consensus mechanism. Although there is proof of stake, it has been shown that networks that use this mechanism are much more centralized and prone to censorship. In the case of Bitcoin, as the value of each coin increases, more and more miners get an incentive to join the network or to start mining Bitcoin. In this way, miners constantly increase the strength and security of the network. Due to the amount of processing power involved in the verification of transactions, it is impossible for any entity or group to successfully take over the Bitcoin network. On the other hand, there is also a downside to mining, which is its energy intensity. The constant rise in the price of Bitcoin, leads to an increasing number of miners, which in turn as a result has an increasing consumption of electricity. Nevertheless, miners have the ability to exploit renewable energy sources. Moreover, renewable energy sources are much more profitable to them than traditional fossil fuels and other non-renewable energy sources.
Source: cointelegraph
Difficulty adjustment
Difficulty adjustment is a feature of the Bitcoin protocol that ensures that new blocks of transactions are added to the blockchain at a predictable rate (a new block every ten minutes). Adjusting the difficulty of mining a new block is automatically executed every 2016 blocks, that is, approximately every two weeks, based on the total computing power or hashrate of the network. The weight adjustment algorithm works by setting a target value for the time it would take miners to solve one block, and that value is ten minutes. If the hashrate increases, miners will need less time to find the block. The result of this will be higher inflation, but the difficulty adjustment will adjust the difficulty of finding the block, so it will again take ten minutes to find the block. On the other hand, if the hashrate is reduced, miners will have a harder time finding blocks, resulting in a slower and less secure network. In the case of reducing the hashrate, the difficulty adjustment will adjust the weight, so that the block can be found easier than before. In short, difficulty adjustment is an essential feature of the Bitcoin network that helps ensure a stable and predictable flow of new blocks, which ultimately helps maintain network security and stability.
Source: cointelegraph
What is hash?
A hash is a mathematical function that converts arbitrary data input into a fixed-length output value. With the help of modern technology, computers can create a hash in milliseconds, but that’s not what a network of miners does with Bitcoin. Specifically, miners are trying to guess this hash, that is, sixty-four digits hexadecimal number. Any miner who guesses this number has successfully “solved a mathematical task” and received a block award. Each block on the Bitcoin network has its own unique hash that identifies it. Bitcoin’s hash plays an important role in ensuring network integrity and security, because if any data in the block changes, it will cause the block’s hash to change as well, making it impossible for that block to be accepted as part of the blockchain. This makes the Bitcoin network safe and resistant to malicious attacks.
Source: cointelegraph
What is hashrate?
Bitcoin hashrate is a measure of the total processing power that mining devices or “miners” use to solve complex mathematical problems and verify transactions on the Bitcoin network. Hashrate is measured in “hashes per second”, i.e. hash per second (H/s). Today’s modern ASIC miners, computers used to mine Bitcoin, measure their power in “terahashes per second”, terahashevs per second (TH/s), and the total power of the Bitcoin network is measured in millions of terahashev per second (MTH/s) and currently stands at just over 350 million terahasheva per second (350MTH/s). This number represents the amount of hash operations that the Bitcoin network performs in one second. The higher the hashrate, the higher the processing power of the network, which, as a rule, means both greater security and reliability of the Bitcoin network.
Source: cointelegraph
51% attack - network vulnerability
51% attack (eng. A “51% attack”) is a situation in which one or more individuals or organizations control more than 50% of the total processing power (hashrate) of the Bitcoin network. This would allow them to manipulate online transactions, including the ability to conduct duplicate transactions, fraud or theft. In such a scenario, attackers could keep certain transactions or undo them, and could also deny rewards to miners not involved in their network control. In short, a 51% attack would completely destroy the Bitcoin network. However, such an attack is considered unlikely, that is, impossible, due to the high need for processing power. Such an attack may have been possible in the initial days of the Bitcoin network when the overall power was very small, but every day Bitcoin is safer and the possibility of carrying out such an attack is dwindling, given that there is no individual or organization that could take over more than 50% of the total processing power of the Bitcoin network.
Source: cointelegraph
Conclusion
Proof of work is a consensus mechanism that uses a number of cryptocurrencies to verify the validity of transactions and award rewards to miners. Proof of work is a competitive process that rewards the most successful miner (the one with the most processing power) and thus creates a free market full of competition. This leads to increasing energy consumption, which further secures the Bitcoin network and thus attracts new investors, which in turn results in an increasing price of bitcoin. We hope that you enjoyed reading today’s blog, and you can share your opinion about the proof of work mechanism and its superiority to the proof of stake mechanism with us on our social networks (Twitter, Instagram).
