When Satoshi Nakamoto was building the first-ever cryptocurrency, and the most popular one until today, Bitcoin he had to find a way to make transactions valid without the need of a third party. Therefore, he created the Proof of Work system which is a famous consensus mechanism to date.

The Proof of Work system needs to verify that transactions are completed in the most fair manner and that no one can complete two identical transactions to scam the system. This is established by the advanced form of mathematics called ‘cryptography’. Does it make sense now why we call them cryptocurrencies?

What is Cryptography?


Cryptography uses complex mathematical equations that can only be solved with the use of special powerful computers. Equations are always different from each other meaning that once it is solved the system recognizes it as an authentic transaction.

A lot of other cryptocurrencies have copied Bitcoin’s code hence, they use the same ecosystem PoW.

What is Proof of Work (PoW)?


I will explain Proof OF Work as it functions in the bitcoin network. So bitcoin, is underpinned by a blockchain that contains all transactions history in blocks that when full they are added to the blockchain. This happens so users are not allowed to spend any of their holdigns twice.

The way that users detect tampering in transactiosn is through hashes. These are long numbers that serve as proof of work. Generating just any hash for a set of bitcoin transactions would be trivial for a modern computer, so in order to turn the process into “work,” the bitcoin network sets a certain level of “difficulty.” This is happening in order for a new block to be mined and later on added to the blockchain by generating a valid hash. This is happening approximately every 10 minutes.

FUN FACT: Proof of Work was initially created to eliminate the growing problem of spam email.

Example of Proof of Work


Let’s pass to theory now. Proof o Work requires a computer to randomly engage in hashing function until it arrives at an output with the correct minimum amount of leading zeroes.

For example, the hash for block #429818, mined on September 14, 2016, for example, is 000000000000000004dd3426129639082239efd583b5273b1bd75e8d78ff2e8d. The block reward for that successful hash was 12.5 BTC.

Each block contains a fix number of 2,012 of transactions involving approximately 1000 bitcoin as well as the header f the previously mined block. It is impossible for somebody to change or manipulate a transaction even by 0.0000001 bitcoin because the resultant hash will not be recognized and the network will not accept the fraudulent attempt.

It is very important to mention that PoW requires nodes (computes)on the newtrok to show evidence of expended computational power in order to achieve consensus in a decentralized manner.

How important is Proof of Work to Cryptocurrencies?


Since cryptocurrencies are decentralized, meaning they are not using any third party to complete transactions etc. blockchains need the network to achieve both consensus and security. Proof of Work is one of the methods that makes it too resource-intensive to try to overtake the network. Other proof mechanisms also exist that are less resource-intensive, but which have other drawbacks or flaws, such as proof of stake (PoS) and proof of burn. Without these mechanisms a network will be attacked by hackers or scammers that want to steal. In this way, people can be sure that transactions are being made safe and in a fair manner and no one can scam the network.

A bit of History for PoW


Proof of Work concept was invented by Cynthia Dwork and Moni Naor in 1993 as a way to deter denial-of-service attacks and other service abuses such as spam on a network by requiring some work from a service requester, usually meaning processing time by a computer. The term “proof of work” was first coined and formalized in a 1999 paper by Markus Jakobsson and Ari Juels. Proof of work was later popularized by Bitcoin as a foundation for consensus in permissionless blockchains and cryptocurrencies.

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