Proof of Work (PoW) Explained
The first consensus protocol of blockchain.
Since Bitcoin got into our lives, many consensus protocols were being introduced. And the most popular consensus protocol became Proof of Work (PoW). Here are the details.
What is Proof of Work
Proof of Work is a blockchain consensus algorithm where the longest chain rules. It allows miners to mine for awards and adding to the chain so that it could manage the consensus among parties without the need for trust. Because of its simplicity for implementation, most cryptocurrencies adopted this algorithm.
How does Proof of Work Works
To illustrate how it works, let’s look at how does Bitcoin mining works:
A block is going to be mined and a party will get a reward. As the prize and the mathematical puzzle has become obvious, nodes on the network compete for the prize. The first node that solves the cryptographic puzzle gets the reward as the block is being added to the chain. As soon as the cryptographic puzzle being solved, records have been recorded to the chain. Another puzzle is solved and the process would continue until a certain date. But, miners would do the transactions and create transaction chains to keep the system safe. As a result, proof of work protocol consumes so much energy and makes it impossible to scale. So, some developers proposed side chains to increase scalability and speed to make things running. But, it has severely limited many cryptocurrencies’ ability to scale.
How the proof of work can be explained mathematically?
There are two mathematical aspects of the proof of work: the gambler’s fallacy and the Poisson Distribution.
In Gambler’s Fallacy, let’s assume that a gambler has unlimited credit. It starts at a deficit and plays an infinite number of trials to breakeven. When we calculate the probability of being ever reaching breakeven, or that an attacker ever catching up with the honest chain will likely approximate to 0 at every attempt that has been made. As a result, the gambler would simply give up with no funds in his pocket.
Similar to Gambler’s Fallacy, the Poisson distribution would work by calculating the density function at each trial and the blocks at the honest chain. When all the calculations are made, the attacker has statistically no chance to capture the honest network.
Have you ever heard proof of work? How would you explain the proof of work to someone? Share your thoughts in the comments section below.