{"id":13281,"date":"2021-05-27T11:55:56","date_gmt":"2021-05-27T06:25:56","guid":{"rendered":"https:\/\/zebpay.com\/?p=13281"},"modified":"2022-07-26T04:09:53","modified_gmt":"2022-07-26T04:09:53","slug":"why-proof-of-work-works","status":"publish","type":"post","link":"https:\/\/zebpay.com\/au\/blog\/why-proof-of-work-works","title":{"rendered":"Why &#8216;Proof of Work&#8217; Works"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_66_1 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/zebpay.com\/au\/blog\/why-proof-of-work-works\/#Proof_of_Work_Explained\" title=\"Proof of Work Explained\">Proof of Work Explained<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/zebpay.com\/au\/blog\/why-proof-of-work-works\/#Do_we_really_need_it\" title=\"Do we really need it?\">Do we really need it?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/zebpay.com\/au\/blog\/why-proof-of-work-works\/#Now_I_know%E2%80%A6\" title=\"Now I know\u2026\">Now I know\u2026<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/zebpay.com\/au\/blog\/why-proof-of-work-works\/#Oh_whats_Proof_of_Stake_then\" title=\"Oh, what\u2019s Proof of Stake then?\">Oh, what\u2019s Proof of Stake then?<\/a><\/li><\/ul><\/nav><\/div>\n\n<p id=\"block-216a0210-289f-4911-86df-f750423cf909\"><strong>Bitcoin&#8217;s proof of work protocol provides security to the network&#8217;s transactions, which is crucial. However, two weeks ago, Elon Musk announced that Tesla would suspend the purchase of its cars using Bitcoin. The announcement cited increased use of fossil fuels for Bitcoin mining as the primary reason for this decision.<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-embed aligncenter is-type-rich is-provider-twitter wp-block-embed-twitter\"><div class=\"wp-block-embed__wrapper\">\n<blockquote class=\"twitter-tweet\" data-width=\"550\" data-dnt=\"true\"><p lang=\"en\" dir=\"ltr\">Tesla &amp; Bitcoin <a href=\"https:\/\/t.co\/YSswJmVZhP\" target=\"_blank\">pic.twitter.com\/YSswJmVZhP<\/a><\/p>&mdash; Elon Musk (@elonmusk) <a href=\"https:\/\/twitter.com\/elonmusk\/status\/1392602041025843203?ref_src=twsrc%5Etfw\" target=\"_blank\" rel=\"noopener\">May 12, 2021<\/a><\/blockquote><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script>\n<\/div><\/figure>\n\n\n\n<p id=\"block-6878b8e3-964b-474d-981d-b15e5f531c1f\">It is possible for both the above statements to be true simultaneously. While PoW is undoubtedly an important part of the Bitcoin promise, we cannot ignore its shortcomings, or attempt to improve upon them. This week, we&#8217;re doing a special, two-part blog series &#8211; talking about the pros and cons of proof-of-work.<\/p>\n\n\n\n<p id=\"block-193f8f05-448c-49af-b8a0-345f4b62f8c2\">Karan Parsnani, front-end developer at ZebPay begins by setting the context for Proof of Work.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"block-c82822e9-e7ac-4516-b5cc-c99c0a543a5a\"><span class=\"ez-toc-section\" id=\"Proof_of_Work_Explained\"><\/span>Proof of Work Explained<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p id=\"block-ed400dc6-9a59-4de9-bd38-d5df14845fb8\"><strong>Proof of work<\/strong> (<strong>PoW<\/strong>) is a form of <a href=\"https:\/\/en.wikipedia.org\/wiki\/Cryptography\" target=\"_blank\" rel=\"noreferrer noopener nofollow\">cryptographic<\/a> <a href=\"https:\/\/en.wikipedia.org\/wiki\/Zero-knowledge_proof\" target=\"_blank\" rel=\"noreferrer noopener nofollow\">zero-knowledge proof<\/a> in which one party (the <em>prover<\/em>) proves to others (the <em>verifiers<\/em>) that a certain amount of a specific computational effort has been expended. Verifiers can subsequently confirm this expenditure with minimal effort on their part. The concept was invented by <a href=\"https:\/\/en.wikipedia.org\/wiki\/Cynthia_Dwork\" target=\"_blank\" rel=\"noreferrer noopener nofollow\">Cynthia Dwork<\/a> and <a href=\"https:\/\/en.wikipedia.org\/wiki\/Moni_Naor\" target=\"_blank\" rel=\"noreferrer noopener nofollow\">Moni Naor<\/a> in 1993 as a way to deter <a href=\"https:\/\/en.wikipedia.org\/wiki\/Denial-of-service_attack\" target=\"_blank\" rel=\"noreferrer noopener nofollow\">denial-of-service attacks<\/a> and other service abuses such as spam on a network by requiring some work from a service requester, usually meaning processing time by a computer.<\/p>\n\n\n\n<p id=\"block-4ead75e5-fc48-4f58-aa22-f5c9f30edd7a\">These are the first few lines of the wikipedia link when you google Proof of Work. Now that we can be really certain that a whole lot of you did not understand anything, we\u2019ll try to make it a bit easy.<\/p>\n\n\n\n<p id=\"block-2fc841fd-036d-4a36-9f66-ddeb516342b8\">Blockchain quite simply is a chain of blocks. Each block has data\/transactions\/information which needs to be secured. To secure the block a hashing function is used to calculate an output. But to reach that output, you need to solve a problem, let\u2019s say puzzles. To solve these complex puzzles\/algorithms, a lot of computational power is required.<\/p>\n\n\n\n<p id=\"block-d6aebc2d-8492-4e03-88e2-36a170674864\">Because a lot of computational power is required,- although it doesn\u2019t mean this but for ease of use you can say &#8211; it acts as a \u2018proof\u2019 that \u2018work\u2019 was done to secure this block. Once an output is received, the other nodes in the network confirm that this works and with this verification, that block is secured. Since, there\u2019s a lot of work going on to secure the network, it becomes trusted. Also, because you do all this work, you should be rewarded and rightly so. The people who do this calculation are called miners; the process is called mining and the reward is BitCoin, but that\u2019s another conversation.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"block-21aba567-4a11-4ec4-baa8-a9444de01084\"><span class=\"ez-toc-section\" id=\"Do_we_really_need_it\"><\/span>Do we really need it?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p id=\"block-4563b71b-6a91-4a26-b450-adcb0e29421c\">The goal of proof-of-work is to prevent users from printing extra coins they didn\u2019t earn, or double-spending. Double-spending is a risk that the digital currency can be spent twice. Unlike physical cash, digital assets consist of a file that can be duplicated or falsified. If users were able to spend their coins more than once, it would effectively make the currency worthless.<\/p>\n\n\n\n<p id=\"block-9789c1e4-2952-463c-8d0f-073ce760d57e\">We usually have banks take care of our accounts. It keeps track of how much money each person has. For \u2018A\u2019 to send money to \u2018B\u2019, the bank simply checks if \u2018A\u2019 has that amount and deducts it and credits \u2018B\u2019 with that amount. In crypto, proof of work provides that solution.<\/p>\n\n\n\n<p id=\"block-80385d28-67d5-48be-8ad7-0d05186761c5\">It is a transparent consensus algorithm. Misbehaviour of a miner on the network may result in him\/her being cut off from the network altogether. Also because it\u2019s consensus, miners broadcast the details of their transactions when they add new blocks to the network. Once this broadcast is made, the nodes leave what they\u2019re doing to verify the transaction for double spending.<br>Everyone has the same records, so these miners have to compete with thousands of others to earn that reward.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"block-fc8e5667-ae55-44f9-ac4e-2877a135b820\"><span class=\"ez-toc-section\" id=\"Now_I_know%E2%80%A6\"><\/span>Now I know\u2026<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p id=\"block-50b204cb-9e37-4718-8311-23bce5413db5\">Proof of work helps to protect the network against numerous different attacks. A successful attack would require a lot of computational power and a lot of time to do the calculations and therefore it would be inefficient since the incurred cost would be greater than the potential rewards for attacking the network.<\/p>\n\n\n\n<p id=\"block-186e4e98-7c92-4982-a544-f4bda930de11\">You know what they say, the longest chain is the honest chain. Bitcoin and Ethereum are the top 2 crypto currencies and both of them use POW. No wonder they are valuable.<\/p>\n\n\n\n<p id=\"block-3131b2b7-b90c-4f36-89e4-3ca137a03c52\">Other important technologies that use POW are LiteCoin, Monero, Decred and everybody\u2019s favorite DOGE. Not financial advice!<\/p>\n\n\n\n<p id=\"block-adb898c9-9347-4882-a7d7-7df85cd43a90\">Because there are a lot of transactions happening on these chains, there\u2019s a lot of computational power required. Hence, the time taken and the value. But, the reward here is security.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"block-1f6d6985-d0ae-4385-9166-71ca645411af\"><span class=\"ez-toc-section\" id=\"Oh_whats_Proof_of_Stake_then\"><\/span>Oh, what\u2019s Proof of Stake then?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p id=\"block-0f8a21c9-b2b3-4432-b8ef-6bd2830af39b\">Proof of Stake is another consensus algorithm. Instead of going into the argument about what\u2019s more secure, we\u2019re going to tell you how different it is.<\/p>\n\n\n\n<p id=\"block-c0e0c2a4-c26d-4747-b7f2-5081b8a0efc6\">While proof of work is a requirement to define an expensive computer calculation, In proof of stake &#8211; the creator of a new block is chosen in a deterministic manner, depending on it\u2019s wealth or \u2018stake\u2019.<\/p>\n\n\n\n<p id=\"block-5be10f01-aa13-4f49-b607-fe6848efd259\">In proof of stake there\u2019s no block reward, so, the miners take the transaction fees unlike in proof of work, where a reward is given to the first miner who solves each block&#8217;s problem.<\/p>\n\n\n\n<p id=\"block-930cb0f2-78b2-4398-8156-97ea90b09570\">Apparently, the argument is proof of work is more centralized because miners with more computational power have a greater chance of winning the mining reward. Proof of stake however, rewards those who contribute to the network by freezing their coins proportionately to the amount they have invested.<\/p>\n\n\n\n<p id=\"block-faf3c8bc-d9c7-4f4a-b98d-d851d638f109\">We\u2019re going to leave the conclusion to you about what\u2019s better. As long as the chain is secure, it\u2019s good for the community.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-css-opacity is-style-dots\"\/>\n","protected":false},"excerpt":{"rendered":"<p>Proof-of-work protocol provides security to the network&#8217;s transactions. Karan Parsnani, front-end developer at ZebPay sets the context.<\/p>\n","protected":false},"author":1,"featured_media":13282,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[14],"tags":[130,131],"class_list":["post-13281","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-crypto","tag-pow","tag-proof-of-work"],"acf":[],"_links":{"self":[{"href":"https:\/\/zebpay.com\/au\/wp-json\/wp\/v2\/posts\/13281","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zebpay.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zebpay.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zebpay.com\/au\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/zebpay.com\/au\/wp-json\/wp\/v2\/comments?post=13281"}],"version-history":[{"count":2,"href":"https:\/\/zebpay.com\/au\/wp-json\/wp\/v2\/posts\/13281\/revisions"}],"predecessor-version":[{"id":18606,"href":"https:\/\/zebpay.com\/au\/wp-json\/wp\/v2\/posts\/13281\/revisions\/18606"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zebpay.com\/au\/wp-json\/wp\/v2\/media\/13282"}],"wp:attachment":[{"href":"https:\/\/zebpay.com\/au\/wp-json\/wp\/v2\/media?parent=13281"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zebpay.com\/au\/wp-json\/wp\/v2\/categories?post=13281"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zebpay.com\/au\/wp-json\/wp\/v2\/tags?post=13281"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}