Proof of Work (PoW) is a consensus algorithm used for preventing the 51% attack or double-spends. Cryptocurrency like Bitcoin is using the PoW consensus to confirm transactions and produce new blocks added to the chain. With PoW, miners compete to complete transactions on the network in exchange for a reward for their speed and accuracy.
The Key Takeaways:
The blockchain Proof-of-Work consensus algorithm is the oldest consensus mechanism and the most popular algorithm. Of course, there are many reasons that may have contributed to its popularity. But the primary rationale for its reputation is its capability to promote honesty in the decentralized ecosystem. Though there may be other algorithms, PoW is still sustainable to attain the Byzantine Fault Tolerance (BFT) objective.
To fully comprehend what BFT is all about, it is a system capable of withstanding failures associated with the Byzantine Generals’ Problem. That means a network can avoid situations where some nodes (or miners) attempt to act against the consensus. With the help of the BFT characteristics, the PoW algorithm works in such a way so that nodes can validate a block within a network by solving a complex mathematical problem.
While the first one to get the solution to the mathematical problem receives the consensus permission to choose a block to add to the blockchain. As an exchange, the successful node gets the tokens as a reward. For example, in the Bitcoin network, the reward is in BTC.
In the end, the PoW consensus creates a relatively healthy and transparent closed economy. Mainly to encourage users to continue to sustain the ecosystem.
These complex mathematical problems refer to a diversity of uncommon arithmetic complications. On top of that, these problems require plenty of computational power to solve.
It ranges from the Byzantine generic problems to the intricate hashing function. For instance:
So, for every successful validation of a block, a reward is given to compensate for the effort. However, the scalability and security is the main challenge as a network grows. And hash power grows parallel to the complexity of the puzzles. As a result, Proof of Stake was introduced to counter the flaws Proof of Work possesses.