Proof-of-work is an underlying concept that powers the blockchain. Here’s everything you need to know about proof-of-work.
There’s a reason why 86% of Americans say they’ve heard of cryptocurrency. However, despite this statistic, the vast majority of the population doesn’t understand the intricacies of how it works.
Specifically, people often scratch their heads when they hear the term proof-of-work. So what is this concept and how does it apply to Bitcoin?
If you want to learn the answer to these questions, you’re in the right place.
In this guide, we’ll give you a quick crash course on how proof-of-work applies to the blockchain in general. Let’s get started!
What is Proof-of-Work?
Proof-of-work is part of the reason why currencies like Bitcoin don’t need to rely on centralized financial institutions like banks.
Traditionally, the financial institution is responsible for confirming each transaction.
So, how did cryptocurrencies like Bitcoin get around this problem? By creating a system that adds new blocks to the blockchain with each transaction.
Basically, the block has a long stream of complicated characters attached to it. This is known as the hash.
When a crypto miner matches the correct hash through heavy computing processing, they get a reward.
In addition to this, a new block is added to the blockchain. This whole process is known as proof-of-work and it’s a vital part of securing almost all cryptocurrencies.
While it is secure, it comes with a downside though. The process of mining cryptocurrency does have a significant negative effect on the environment.
How Does it Work?
You can think of the blockchain as a public ledger with each entry made up of a block.
Currencies that use proof of work have a specific hash attached to each one of these blocks on the chain network.
In order to add a new block a miner must guess the long character combination. How do they do this? By using computers that randomly generate guesses at the code.
Finding this hash number is incredibly difficult. That’s why warehouses full of computers are devoted to guessing it.
But, once it’s found it’s incredibly easy to verify. That means that it’s impossible to manipulate public records.
How Does all this Tie into Cryptography?
Proof-of-work, blockchain technology, and every type of cryptocurrency all fall under the umbrella of cryptography.
Cryptography is a method of securing information when it’s sent from one individual to another.
It’s the foundation that cryptocurrency and proof-of-work are founded on. If you want to learn more about this important concept, make sure to check out this resource here.
Appreciate Learning About Proof-of-Work? Keep Exploring
We hope this guide helped you learn how proof-of-work functions in the blockchain. As you can see, this feature is integral to the prevention of manipulation in cryptocurrency records.
It’s also the main way in which miners make money. As such, it’s important to understand exactly how this concept works if you want to invest in crypto.
Appreciate learning about this important crypto topic?
If so, you’ll love some of the similar articles on our site. Keep reading to find them all.