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Proof Of Work

The proof of work system is the original algorithm that Bitcoin and other SHA-266? cryptocurrencies utilize. With the blockchain, this is used to verify transactions in turn, create new blocks the be added to the publicly viewable ledger. As with any cryptocurrency network where users can send each other digital tokens, great care should be taken to ensure that the transactions are verified and blocks placed correctly on the ledger. With the Proof of Work system, this responsibility is left to miners and their mining hardware.

Typical Proof of work ASIC mining farm
Typical Proof of work ASIC mining farm

Proof of work mining can be participated in and utilized with a wide range of specialist hardware from CPU, GPU, FGPA, and the current technology with ASIC machines. Their sole purpose is to solve mathematically intensive problems or puzzles, and there are a lot of them to process at any one time with advanced functions including integer factorization and the overall location of the input/output strings.

The way this problem is overcome is called a hash (sum).

When the miners taking part solve a block, with either a solo mining or multi-user pool approach, the miners are incentivized for being online with the expensive hardware, electricity, internet connectivity costs and so on, in the form of mining rewards, for solving the mathematical equations that each block requires to be made valid, this is then verified by other nodes on the network, that block is then added to the blockchain ledger and this path of the blockchain is followed.

There are many different hardware devices that are in a race to solve this hash, with each block that is created and processed, as more and more machines connect to the network, the hash difficulty rises and the race to win the block becomes harder and harder to continue taking part in. Sometimes, if for instance, a big mining pool goes offline due to a hardware error or internet outage, or perhaps if the coins being mined profitability drops and it cost more to run the hardware than the rewards pay, the network difficulty can in fact drop making rewards easier to mine and gain.

Miners are in a constant profit over power match with ever-increasing resources being needed to be made available for the same returns, these resources come in the form of electricity and actual mining hardware. (with the added space, noise and added maintenance requirements)

This is vastly different to the Proof of Stake algorithm with its overall real-world workload, whereby a single actively internet-connected staking wallet is used, the traditional mining? reward system is replaced by a coin weight and active time online incentivized reward system. As well as regular staking client wallets, masternodes are also integrated into the Proof of Stake system, these specially configured wallets are tasked to help regulate the network with governance responsibilities and also to verify then convey transactions.

Proof of Stake is being utilized more and more, ION coin and other cryptocurrencies have less of an environmental and resource-hungry footprints when compared to those with proof of work systems. Peercoin? was the first cryptocurrency to utilize the Proof of Stake method.

Page last modified on August 01, 2019, at 10:11 AM