Introduction

Certain consensus mechanisms are put in place to validate and ensure the security of transactions on the blockchain. Proof of Work (PoW) and Proof of Stake (PoS) are two of those mechanisms. However, this article will explain all you need to know about Proof of Work.

Leggo!

What is Proof of Work (PoW)?

Growing up, whenever my parents wanted my siblings and me to do certain chores around the house, they would incentivise it. Whoever finished first and performed the task well would get a hundred naira (yeah, I know. But to be fair, it was a lot of money to us then). Of course, they would inspect the job first before you would get paid. That is kinda sorta how proof of work works.

Hold on, let me explain.

When a user initiates a transaction on the blockchain, miners compete with each other to solve the computational puzzles involved. The first miner to complete these puzzles will be rewarded with cryptocurrency units. They would also reserve the right to add the new block to the blockchain.

Miners collect the data (the transaction) and check to see if it meets particular criteria. If it does, they put this set of valid transactions together to form a new block. This new block contains the latest data collected, a reference to the previous block and a timestamp.

Next, the miner has to find a nonce value - a pseudo-random value used in mining - which when combined with the data in the block produces a hash value that meets specific criteria. Now this process is called Proof-of-Work.

a pseudo-random number is a set of numbers that seem like they were generated randomly while they were in fact calculable.

The first miner to get this proof of work broadcasts it to the network. Other miners individually confirm the validity of the proof of work provided. If most or all the nodes confirm the proof of work, it will be added to the blockchain and the miner who solved it receives some cryptocurrency units.

How does the Proof-of-Work mechanism work?

We have learnt that proof of work is the process by which miners add new blocks to the blockchain by completing complex mathematical computations or finding nonce values which when added to the data in a block, produce hash values which meet specific criteria.

Let us see how exactly it works.

• Block Formation:

  

  First, miners gather the set of verified transactions from a user into a block, together with other block information like a reference to the previous block and a timestamp.

• Hashing:

  Next, they have to find a nonce value that will produce a hash when combined with the data in the block. They do this repeatedly till a hash value that satisfies the set criteria is reached.

  An example of these criteria is ‘leading zeros’. Here, miners are required to find a nonce value which combines with other block data to produce a hash that starts with a particular number of zeros.

• Difficulty adjustment:

  Depending on the criteria required, the time taken by the miners to produce hashes varies. To ensure a consistent block creation rate in the blockchain, the network automatically adjusts the difficulty level in getting the hash.

  These adjustments occur after some blocks to ensure that blocks are created over a pre-determined average rate. It takes roughly ten minutes for blocks to be added to the Bitcoin blockchain and about 12 seconds on the Ethereum blockchain.

• Finding the nonce:

  Miners use computational power to get multiple through multiple nonce values until they find the one that produces a valid hash that meets the difficulty requirement.

• Block Validation:

  Once a miner gets a valid nonce and hash (the PoW), they broadcast it to the network. Other miners validate this proof of work by independently confirming that the nonce and hash produced satisfy the required criteria and that the transaction is valid. This process ensures that all the participants come to a consensus on the validity of the block.

• Block addition:

  If most or all of the other miners agree that the transaction is valid, the block is added to the blockchain and the original miner gets the reward.

Applications of Proof of Work

When we hear proof of work, our minds automatically go to the blockchain. PoW can be used in domains outside of the blockchain as well. We will explore the applications of PoW in blockchain and other fields.

Applications of PoW in the blockchain:

In the blockchain, PoW serves the following functions:

• Transaction Validations: PoW aids transaction validation in a blockchain. By completing a puzzle, a miner proves that he has done all necessary computations to confirm and include the transactions in a block.

• Block Creation: PoW allows miners to add new blocks to the blockchain. Miners compete against each other to obtain a valid PoW solution and the first miner who does, gets to add the new block to the blockchain.

• Consensus Mechanism: PoW allows miners to come to a consensus on the validity of transactions in the blockchain. The first miner to get the proof of work solution broadcasts it to other miners on the blockchain for them to verify. The longest valid chain of blocks signifies that most miners agree on the blockchain’s history.

• Security: Solving computational puzzles requires high computational power and time. This protects the network from cyber-attacks because the attacker would need to have a high portion of this computational power.

  Additionally, the PoW consensus mechanism requires all miners in the network to verify transactions, which makes it extremely difficult to execute fraudulent transactions.

• Incentives: Proof of work serves as an incentive mechanism to encourage participants to contribute and secure the network. Miners receive block tokens which are newly minted cryptocurrency units, upon the successful mining of a block.

Other systems where PoW can be applied

Some other systems where PoW is applied include:

• Anti-spam systems: PoW can be used to avert email spam and other forms of online abuse. In these systems, the sender is required to solve computational puzzles before sending messages, making it less possible.

• Internet of Things (IoT) security: The PoW mechanism can be used in IoT security by making users solve computational puzzles before sending data or gaining access.

• Password hashing: PoW can be used as a method for securing passwords where users are required to solve computational puzzles to set or change their passwords thereby making it impossible for hackers to gain access.

To sum it all up, PoW is one of the ways that miners can contribute to and prove their involvement in a network. They compete to get the PoW for a block because the miner who gets it first receives the reward. Miners in a blockchain network can also be called nodes and these nodes agree on the validity of the nonce and hash.

Ready to learn more about how the blockchain works? Stick around for more articles like this one!