What is The Proof of Work? (PoW)
Proof of Work (PoW) is an algorithm of consensus in a blockchain network. In the blockchain, this algorithm is used to verify transactions and to generate new blocks in the chain. With proof of work, miners compete against each other to complete transactions on the network and be rewarded. In this network, users send digital tokens to each other. A decentralized ledger aggregates all operations into blocks. It is required to be careful about the approval of transactions and arrangement of blocks. In this process called mining, miners deal with these special nodes. The basic working principles are to make it easy to prove complex mathematical puzzles and solutions.
What does “mathematical puzzle” mean?
A solution is a matter of computational power.There are a lot of solutions, for example:
- The hash function answers how you will find input-output.
- Factorizing an integer, in other words; presenting a number as the product of two other multiplications.
- Guided tour puzzle protocol. If the server suspects a DoS attack, it is required to calculate the hash function for some nodes in a defined order. In this case, a “ciphering function value chain finding” problem.
The answer to PoW problem or mathematical equation is called encryption. As the network grows, the equations are faced with more difficulties. Algorithms need more and more encryption power for solving power. So, the complexity of the task is becoming a sensitive issue.
How does this happen?
The operation and speed of the blockchain system depend on them. But the problem should not be too complicated. As the problems get complicated, block production takes a lot of time. The transactions are stuck unless they are not implemented, and as a result, the workflow stops for a while. If the problem can not be solved in a certain time period, it is a kind of miracle in block production. However, if the problem is very easy, it can give security flaw for DoS attacks and spams. The solution needs to be easily controlled. Otherwise, all nodes do not have the ability to analyze whether calculations are correct. Then you will have to trust the other nodes, which violates the principle of transparency, which is one of the most important features of the blockchain.
How is this Algorithm Implemented in the BlockChain?
The miners solve the puzzle, create a new block and approve the transactions. The complexity of a puzzle depends on the number of users, available power and network load. Each block node contains the previous block node, which increases security and avoids any violation of block. If a miner solves the puzzle, a new block is formed. Transactions are placed on this block and accepted.
Where is PoW Usually Applied?
Proofs of Work are used in many cryptocurrencies. PoW’s most famous application is Bitcoin. Bitcoin is what proposed the idea of consensus. These puzzles are called HashCash. This algorithm allows a puzzle to change its complexity based on the total power of the network.
The average duration of block formation is 10 minutes. Bitcoin-based cryptocurrencies, for example, have a similar system, such as Litecoin. The other big project about PoW is Ethereum. Given that about three out of four projects have been implemented on the Ethereum platform, it is fair to say that most of the blockchain implementations use the PoW consensus model.
Why is a PoW Consensus Algorithm UsedFirstly?
Its main benefits are low effect of gains in anti-DoS attack defense and mining opportunities.
Protection from DoS attacks: PoW puts some limits on network actions. Much effort needs to be done. An effective attack requires a lot of computing power and time. Therefore, it is possible to attack because the costs are too high, but it is useless.
Mining facilities:No matter how much money you have in your wallet. The important thing is to have great computing power to solve puzzles and create new blocks. Thus, the owners of large amounts of money are not responsible for making decisions for the entire network.
Does PoW Algorithm Have Any Disadvantage?
The main disadvantages are large expenditures, “useless” calculations and “51 percent risk of attack”.
Large expenditures: Algorithms require very specific computer hardware to run while mining. In addition to the prices of the equipment used, these devices consume excessive amounts of power.
Useless calculations: Miners work to produce blocks and spend a lot of energy. However, they can not use these calculations on any other subject. They guarantee the security of the network, but they can not be applied to other disciplines such as science or business.
51% risk of attack: A 51% attack or majority attack is a situation where a majority of users or groups control in mining. Attackers have enough power to control most events on the network. They can monopolize the creators of a new block and receive rewards as they can prevent other miners from filling blocks. They can reverse transactions.