Blockchains are among the systems with the highest security ever. This safety is partially achieved by various decentralized consensus mechanisms, such as one of the most popular solutions, Proof of Work (PoW). In this article, we’ll simply explain what this term stands for, how it operates, and list its pros and cons.
What is a consensus mechanism?
On a decentralized Blockchain, there has to be a way for the participating computers (nodes) to agree on which transactions are valid, and which are not. A consensus mechanism ensures such agreements are consequent and based on the same principles every time. It is essentially a set of rules that defines the grounds of transaction validation and malicious behavior, as well as determines, and enforces punishments. Two of the most popular mechanisms are Proof of Work, which is used by Bitcoin for instance, and Proof of Stake, implemented by numerous altcoins, such as Polkadot.
Proof of Work Explained
Proof of Work is a consensus mechanism that is based on how much computation is behind a validation. In practice, on Bitcoin's blockchain, nodes have to solve complex mathematical equations with the goal of finding a specific number determined by the consensus mechanism. Whichever computer (node) manages to retrieve this number first can validate a group of transactions, getting some BTC in return - this process is also called Bitcoin mining. Imagine it like this: for each block of transactions, the consensus mechanism creates a lock without a key, and supervises the nodes while they are trying to come up with a way to open it; since this task is not only really hard, but requires quite a bit of luck as well, whichever manages first must be the most worthy, hence its solution becomes trusted.
Proof of Work: Pros and Cons
Proof of Work has proven to be extremely secure, however, it also has some cons next to its many pros. To begin with advantages, its fully tamper-proof nature has to be one of the main ones. During its almost fourteen years of existence, Bitcoin hasn't registered (read more: https://www.coinpass.com/en/blog/academy/what-is-proof-of-work-pow-simply-explained-by-coinpass)…
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