Blockchain is a structure in which every data to be processed is encrypted and stored in a structure called a block at certain intervals, in each new block there is a summary of the previous block, and all this data is stored in more than one data storage point. Every blockchain has a consensus mechanism, and the most widely used are Proof of Work and Proof of Stake. The subject of this article is Proof of Work. For more information on blockchains, you can read our article “What Is Blockchain?” by clicking here.
The idea of Proof of Work was introduced in the early 1990s. The initial purpose was to block spam emails sent from a single address to multiple addresses. The idea was to have computers do a little work before sending emails. In this way, while there is no problem in sending a single email, high resources and processing power are needed in sending bulk emails. In 2008, the Proof of Work consensus mechanism was implemented for Bitcoin in the Bitcoin prospectus published by Satoshi Nakamoto.
In a blockchain, blocks consist of transactions and transaction groups that are brought together in order of transactions. In the consensus mechanism, miners perform a “work” and spend hardware power to decode the next encrypted blocks. Nodes are computers running the network’s software. Transactions made on a blockchain are transmitted to the network by nodes and are permanently placed on the blockchain after being encrypted. Nodes download historical data from the blockchain to check whether the transactions transmitted by miners conform to the blockchain’s protocol. These nodes refer to the previous block processed in the blockchain, and each records an up-to-date copy of the blockchain.
We said that in the Proof of Work consensus mechanism, miners perform a “work” and spend hardware power to decode the next encrypted blocks. Miners spend computing power to solve valid blocks that comply with the rules of the blockchain network they are on. For a single block, thousands of miners compete to solve the given mathematical problems in the fastest and most accurate way at the same time. At the end of this process, the miner who succeeds is rewarded. To succeed, miners create random strings of numbers called “hashes”. The winning hash is then spread across the network for other miners to confirm whether the solution is correct or not. If the solution is correct, the data is processed into the blockchain, and the miner gets his reward. The first correct solution is accepted and verified. The reward is paid in the network’s valid cryptocurrency. For example, the cryptocurrency is Bitcoin for the Bitcoin blockchain. Today, most of the mining operations are performed by five large Mining Pools. And it is detrimental to blockchains as it can cause what we call a 51% attack.
A 51% attack is a situation in which mining power is controlled by a user or a group of users. Thus, the more the miners are in different locations and independent from each other, the healthier the data is for blockchains in terms of accuracy.