Introducing Magic ID – Digital Identity Control with Magic Connect
At Magic Square, accomplishing digital security in the crypto-space is at the forefront of our vision. We
Some investors believe that despite being the older of the two, Proof of Work is superior and even more complex. It may have imperfections, but it was the first consensus mechanism, and the majority of the crypto community still uses it.
If you search “proof of work” on Google, you will learn that proof-of-work is the bitcoin network’s consensus mechanism. And, yes, that is true, but there is much more to it than that.
PoW is a technical term for an algorithm or system that expends significant effort to detour or eliminate phony uses of computing power. That is why, in 2009, PoW was initiated on the bitcoin network to handle the problem of double-spending, which, if left unchecked, could be a major issue for the blockchain system.
Solving the issue of double-spending was the number one obstacle in the creation of digital currencies and blockchain technology. In short, double spending is when you spend the same coins in multiple different transactions. If this were possible, it would create duplicate coins, reduce coin value, and effectively render the system worthless and unpredictable, causing a collapse of digital transactions and blockchain technology. To prevent it, the Proof of Work Consensus mechanism was introduced.
Blockchain technology is intended to permanently and securely store transaction information. Blockchains are made up of blocks that are verified and added to the network’s chain. Each of these blocks contains details about the most recent transactions. The key point is that the new blocks are directly linked to the previous blocks, forming a chain.
Each block on the chain is given an encrypted function, or “hash” function, that communicates all of the transactions of the specific block in the form of an encrypted code. If one transaction on a given block were different, the entire hash function would not be the same.
Ever heard of bitcoin mining? Well, they are the key to the PoW mechanism. Miners of bitcoin and other PoW-secured cryptocurrencies invest their computing power, or “work” to solve the hash function of each block on the blockchain and thereby verify the transactions on the block. The function must have the same solution across all of the verification nodes in order to be created. Each miner solves the function, and if all of their solutions are equivalent, it can be established that the authenticity of each transaction on the block is verified and true.
What happens when a bitcoin block is mined? Thousands of computers around the world are randomly guessing until they solve the hash function for the block. The function cannot be predicted and must be guessed and double-checked to ensure that it is correct.
Figuring out this fairly difficult password for a block takes a lot of computing power. Some mining firms use the equivalent amount of power as entire countries! This investment of computing power is what we call the “work”, and the reward for the work is the “gas” fees each user pays to include their transaction in the block.
After a block has been confirmed by the validators, all of the network’s records are updated to include the new block.
First and foremost, it is secure. The sole purpose of the PoW system is to provide a dependable, safe, permanent, fair, and transparent system that will form a consensus based on the contributions of network participants.
The second benefit is consensus itself. When miners add a new block to the network, they broadcast the details of a transaction. Once this transaction is completed, the nodes double-check it to ensure that the transferred asset has not been double-spent.
Keep in mind that the term, “consensus mechanism” implies that everyone has the same records. All miners must compete with thousands of others to earn rewards.
The main issue with Proof of Work is the amount of energy required to solve the hash. According to recent studies, Bitcoin’s energy consumption is equal to that of the entire country of Switzerland.
The amount of energy could grow significantly over time, posing a threat to the environment by consuming massive amounts of electricity.
This is the main reason why the Proof of Stake (PoS) mechanism was introduced. Interested in PoS? Read about it here.
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