Blockchain Short Story 007: Proof of Work, what is it good for?

You can either love or hate Bitcoin’s Proof of Work (PoW) consensus algorithm and its energy consumption, however, it possesses a technically fascinating property that I’d like to discuss in this post.

Prior to Bitcoin, voting-based consensus mechanisms, such as pBFT (Castro, Liskov; 1999), were feasible. The critical difference is that they required maintaining a closed list of network authorities (e.g., miners, validators) to function. The pertinent question here is: who determines who is included in this list, and who is not? A distinct characteristic of Bitcoin’s PoW is the absence of a closed list of authorities. Instead, the list of authorities is open. There’s no “gatekeeper” responsible for granting permissions. The mere act of investing energy can grant you authority in the PoW network, an idea that was unprecedented prior to 2008.

This openness, along with being permissionless, neutral, and resistant to censorship, comes with a cost — the energy invested. However, the question remains: does the substantial energy expenditure justify acquiring these unique characteristics? Judging by Bitcoin’s price, it seems there are people willing to pay for it.

Image from evening_tao @ freepik