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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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The main essence of the decentralized blockchain technology is the lack of control over the system of one person or a group of people. In decentralization lies the main advantage of the blockchain over the banking or any other financial system that currently exists.

The decentralization itself is ensured by the fact that the participants of the system themselves serve it, without involving intermediary organizations. If the user wants to send the cryptocurrency to another wallet, the transaction must be verified and confirmed by its liquidity from three to six miners. Successful transactions are recorded in a block weighing 1 MB (a chain of such blocks is called a blockchain). Blocks are also interconnected, therefore, any change in at least one of them is possible only by census of all the others.

For each block, the miner pool receives its reward in bitcoins or other crypto money, depending on what was mined. Knowing how a decentralized platform works, you can highlight the main advantages.

Decentralized Cryptocurrency Security
In order for the transaction to be successful, it is necessary to collect the majority of the votes of the participants in the system, if one node confirms liquidity and the rest do not, the money will be returned to the sender’s wallet. Due to the connectedness of the blocks, you cannot change one of them unnoticed.

The entire chain of blocks is stored on the machines of each participant in the system, if the device was temporarily offline, data connection immediately starts when connecting, therefore, to change the chain, you will also have to crack 51% of the devices on which the records are stored.

Also, from a security point of view, decentralized cryptocurrencies outperform the dollar and other fiat in that they do not have regulators that, if they wish, can steal funds from any wallet. The only exceptions are some exchanges where trading is conducted, since they are centralized.

Anonymity
In order to operate with a decentralized cryptocurrency, you do not need to go through authorization of the person. Anyone can have a wallet of one of the following types:

Online
Downloadable
Hardware
And after gaining access to it, store your money there, accept and send it, while the identity will not be verified.

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One of the most popular cryptocurrencies for mining, after Bitcoin is the Dash cryptocurrency. And of course, she, like all other altcoins, has her own characteristics. If you are interested in this cryptocurrency, then with a 100% guarantee you are faced with the concept of “masternode”. In this article, as clear as possible, I will tell you what a masternode is.

First, let’s look at the word masternode itself. It consists of two words: “master” and “node”. “Noda” in translation from English means “node”. Which node? In this case, this is a term from the field of computer science. A node is, in essence, a computer that is connected to a network and which is capable of receiving and transmitting information to a shared network. But do not think that your PC is also a host. It doesn’t work like that. By viewing various pages and videos on the Internet, your computer does not become a node (node). This implies connecting to a “special” network, all of whose participants are working to achieve one goal. The most obvious example is mining. The word “master”, in this case, indicates a 2-rank division of the network. That is, ordinary nodes function in it, and nodes of a higher order – masternodes. Masternodes have a special purpose. For what we need, we will analyze the example of the Dash cryptocurrency.

Masternode on the example of the Dash network
The first thing you should remember, masternodes are not only a feature of dash, it’s easiest to explain by the example of this cryptocurrency what they are used for.

Like all cryptocurrencies, dash has its own peculiarity. In this case, this is increased anonymity. It is provided by a mechanism called “PrivateSend”. With its help, transactions are “forwarded” and cannot be tracked. Also, the network has a tool for conducting quick transfers – InstantSend. The correct functioning of these mechanisms directly depends on the number of masternodes in the network. But their responsibilities do not end there.

In the Dash network, masternodes are a privileged group that serves the network and solves network development issues. This happens by voting of all masternodes.

Simply put, masternodes and nodes are a big family. But masternodes in this family are the parents who control everything. And nodes are children who provide cryptocurrency mining, which brings income to both groups. When a new block is found on the network, the reward for it is distributed. The nodes that worked on it receive 55% of the reward. And the rest of the amount is shared among all masternodes.

The main feature of the masternode network is that you can come or go from the system at any time. The network is not tied to individual users. She is absolutely decentralized. There is not a single person in the world who would indicate to whom to give a masternode, and to whom not. You make this decision yourself. As well as the decision to sell the masternode.

In principle, any person can receive a masternode. To do this, your Dash wallet must have a sum of 1000 dash, a permanent IP address and the possibility of smooth operation of your computer (it should work 24/7).

If for some reason you want to get rid of dash and, accordingly, lose the masternode, it will not be difficult to do this. And if you are a beginner, and you are interested in this cryptocurrency, you can get a masternode and develop a network.

Can I get a masternode now?
As we have already found out, in order to receive a masternode, you must have 1000 dash in your account. You can get this amount either through mining, or simply by purchasing the right amount of Dash. As soon as you have the necessary amount, you can get a masternode. It is important to know that you are not buying it, your money remains yours. And the amount of 1000 dash is needed only in the form of collateral.

When the masternode appeared, Dash cost about $ 10. That is, 1000 could be bought for $ 10,000. Now, one Dash unit costs $ 420. In short, you need $ 420,000 to earn a masternode. This is an unrealistic amount for most people. But if you have it, then by investing your money, you can increase it.

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