Proof-Of-Work Is Important For Bitcoin — Bitcoin Magazine

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This is an opin­ion edi­to­r­i­al by Pierre Gilden­huys, the co-founder of a Hong Kong-based social envi­ron­ment tech startup.

Proof-of-work is the con­sen­sus mech­a­nism that the Bit­coin pro­to­col uses. On a fun­da­men­tal lev­el, this means that work has to be done to prove the trans­ac­tions that have tran­spired on the net­work are valid. 

Proof-of-work func­tions with spe­cial­ized “com­put­ers” known as appli­ca­tion-spe­cif­ic inte­grat­ed cir­cuits (ASICs), which input trans­ac­tion data, infor­ma­tion from the pre­vi­ous block hear­er and a nonce (ran­dom num­ber) to guess the result of hash func­tions. Hash func­tions are one-direc­tion­al math­e­mat­i­cal equa­tions, so it is impos­si­ble to fig­ure out a result­ing out­put from a pub­licly vis­i­ble input oth­er than through rapid guess­ing as these ASICs do. “Min­ers” are the peo­ple who oper­ate these machines, and they want to increase the num­ber of hash­es (or guess­es) per sec­ond that their devices can pro­duce, and they want to find the cheap­est and most reli­able source of ener­gy so that this min­ing becomes prof­itable for them to pay off the cost of their machines and to make an income to cov­er their oth­er expens­es. Despite this, it is an incred­i­bly com­pet­i­tive indus­try as a result of Bitcoin’s dif­fi­cul­ty adjust­ment: depend­ing on how many hash­es per sec­ond are min­ing on the net­work, the com­plex­i­ty and dif­fi­cul­ty of the hash func­tion will increase or decrease accord­ing­ly so that it takes an aver­age of 10 min­utes for each new block to be found across the glob­al network. 

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