Cryptocurrency mining is a fairly complex process that works thanks to many different algorithms and protocols. One of them is called “Proof-of-work.” It is this algorithm that ensures the correct operation of both mining and the entire cryptocurrency system in general. This is not a very difficult term and even a novice will be able to understand what its meaning is. In this article, we will tell you what proof-of-work is, in simple words.
What is the essence of the proof-of-work algorithm?
The proof of work algorithm, the translation of which literally means “proof of work”, is an algorithm that is designed to verify the completion of work.
To understand how this algorithm works, it is best to consider the simplest example. Let’s say we mine ether. Our computer performs many complex calculations, which then need to be verified by another computer. Our calculations are sent to another computer, and he, in turn, according to the existing template can very quickly check our calculations for accuracy. If they are correct, then, for example, if we calculate the block, we get a reward. The peculiarity of this work is that it takes ten times less time to complete the verification than the calculations themselves.
History of the Proof-of-work protocol
In its original form, the Proof-of-work protocol had other outlines. In 1993, one of Microsoft’s experts put forward proposals to protect Internet resources from excessive use.
He suggested making a mechanism that would open access to any resources only after the computer completes special calculations.
Four years after this, the protocol was first used. It was implemented as part of the Hashcash project, whose task was to protect against spam. And he did a great job with that. It became very difficult to carry out mass spamming, as the computer had to make a lot of calculations to send it. And at the same time, sending ordinary, single messages did not become more difficult.
As a result, after the successful, practical application of this protocol, many articles were written about it by experts in the field of information security. And in 2008, it was used to create a bitcoin network. Of course, the protocol used was not the initial one, but a slightly modified version. The SHA-256 function was added to it, which helped it to work stably. A mechanism was also added that changed the complexity of the calculations depending on the total power of all computers on the network.
The impact of the Proof-of-Work protocol on mining
Proof-of-Work mining is the most popular mining option at the moment. The use of this protocol has led to an unprecedented development of the special equipment industry. Since due to it the complexity of calculations is constantly increasing, newer devices intended only for mining are constantly being released. In 2012, the power of the blockchain network exceeded the performance of all the world’s supercomputers.
One of the drawbacks of this algorithm is the huge demand for electricity consumption. This is a very significant drawback, as miners have to spend up to 30% of their profits on electricity. This increasingly leads to talk about the widespread replacement of the protocol with alternative types, for example, the Proof-of-Stake protocol. What is the Proof-of-Stake protocol? This is a topic for a separate article. In short, it reduces power consumption and solves the problems of the Proof-of-Work protocol, but at the same time it has many of its drawbacks. So now there is no equally secure protocol, and all its alternatives have more disadvantages than advantages. Most likely, until a more perfect protocol is developed: Proof-of-Work will remain the main algorithm for use in the cryptocurrency system.
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