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

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.