Proof-Of-Work Is Essential For Bitcoin – Bitcoin Magazine

This is opinion editor Pierre Gildenhuys, co-founder of a Hong Kong-based social media technology startup.

Proof of work is the consensus mechanism used by the Bitcoin protocol. At a basic level, this means that work must be done to prove the validity of transactions that have taken place on the network.

Proof-of-work functions with specialized “computers” known as application-specific integrated circuits (ASICs) that input transaction data, information from the previous block listener, and a one-off (random number) to estimate the result of hash functions. Hash functions are one-way mathematical equations, so it’s impossible to infer from the obvious input, except for quick guesses, as is the case with these ASICs. “Miners” are the people who run these machines and they want to increase the number of hashes (or guesses) their machines can produce per second, and they want to find the cheapest and most reliable source of energy to turn this into mining. it is profitable for them to earn income to cover the cost of their cars and cover their other expenses. Nevertheless, Bitcoin is an incredibly competitive industry as a result of difficulty regulation: depending on how many hashes are mined per second on the network, the complexity and difficulty of the hash function will increase or decrease accordingly, so that on average 10 minutes for each new block found in the Global network.

Blocks are a set of transactional data that must be transferred and added to the chain of all previous blocks in the network, and will only be transferred when the answer to the hash function is found and added to this “blockchain”. Miners do this by receiving transaction fees paid by users, as well as earning a block subsidy, which starts as 50 bitcoins but halves every 210,000 blocks, roughly every four years. (The current block subsidy is 6.25 bitcoins per block.) The Bitcoin protocol has a maximum supply of 21 million bitcoins, meaning that the block subsidy will run out in 2140 and all mining rewards will be paid by transaction fees.

The main importance of proof of work:

Bitcoin production has real world value.
There are real-world costs to defending the integrity and correctness of Bitcoin.
Bitcoin has an “unsustainable cost”, meaning that it will be possible to fake bitcoin or fake bitcoin transactions only by repeating all the expensive proofs that came before it, at a speed that exceeds all ongoing proofs. – work on the network.

It has already become prohibitively expensive and impossible for any individual, nation-state, or organization to gain the 51% needed to gain control of the network and deliberately change its transaction history.

This contrasts with proof-of-stake, which serves as the consensus mechanism for many altcoins, digital penny stocks, and other Ponzi schemes that are traded as alternatives to bitcoin.

Proof-of-stake works by locking the “stake” or, more simply, the tokens of that protocol so that they cannot be spent. The number of tokens represents your chance to confirm a block of transactions. The more tokens staked, the higher the chance of confirming a transaction and thus the more often you will be rewarded.

With that in mind, most altcoins were given to insiders and development teams before they went public – so a large portion of those tokens were already owned before outsiders started acquiring or staking them.

According to a study by Sam Callahan, Ethereum had an officially accepted value of around 20% – the lowest of all altcoins – meaning that these insiders would only have to gain an additional 31% after going public to change the protocol. they were in whatever way it benefited them. Although Bitcoin has a provable 0% premium, the number of bitcoins owned by any one person or group cannot change the protocol in any way, unlike altcoins. The only way to change the Bitcoin protocol is through true consensus of 51% of the work done for the network, which has historically been incredibly difficult to achieve, and thus Bitcoin’s benefits are not affected unless the changes are beneficial to everyone on the network. Research on the “Block Size War” is a good way to understand this.

Conversation proof results:

Proof-of-stake has no real production cost.
Most of the 51% share is easily acquired by wealthy individuals, nations and organizations that can change the rules of protocol for their own benefit.
Defense of proof tokens based on trusting anyone with enough capital or enough tokens to not change the protocol.

Proof of work is a good use of energy because it secures the global money network in such a way that no one can change the rules or produce more tokens to increase the supply, meaning it becomes a financially viable money to hold for the long term. duration. Proof-of-stake is not an adequate replacement for proof-of-work because it does not address the issue of malicious parties interfering anywhere in the world at any time.

Blockchain is not a new development, and financial payment rails can be developed that are faster than any platform using blockchain. Blockchains distribute aggregate information about transactions across thousands of computers globally, making it much slower than distributing balances from a centralized system. The only reason Bitcoin uses a blockchain is because it is not truly decentralized. And with proof-of-work, it’s certainly decentralized, but since decentralization of proof-of-stake chains can’t be ensured, by using proof-of-stake altcoins, you’re essentially relying on a centralized platform. malicious intent and thus renders the use of a proof-of-stake system irrelevant in the presence of more efficient centralized systems such as PayPal, Cash App or other digital payment platforms.

If you are comfortable with the risk of having your funds suspended, censored or confiscated for any reason – or rather, the platform being found to be fraudulent or insolvent – then use centralized systems, such as legacy financial systems or digital payment programs. However, using proven cryptocurrencies, which are mostly centralized Ponzi schemes that enrich their founders, is a waste because they are meaningless and just take up storage space that could be used to store more important data for the future.

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