Welcome to the Bixiaobao Blockchain Open Course! Our topic is: What is POW consensus mechanism?
First of all, let’s have a look at what a consensus mechanism is.
Since blockchain is decentralized, how does this decentralized world run? Based on what rules? Also, blockchain has many nodes, what are the incentives to attract users to join the network as nodes? Multiple nodes maintain a database, so how do we decide which node to write in? When? And once written, how to ensure that it will not be changed by other nodes (irreversible)? The answer to these questions is the consensus mechanism.
In general, consensus mechanism is a kind of rule in the blockchain world and all nodes follow it. Like different traffic rules in different countries, different blockchain worlds have different consensus mechanisms. At present, the common consensus mechanisms are POW, POS, DPOS, PBFT, etc. Today we are discussing the POW consensus mechanism.
What is POW consensus mechanism?
POW (Proof of Work) consensus mechanism first appeared in 1993 and was mainly used to tackle spamming, which requires the initiator to perform a certain amount of operations that takes some time of computers. Later, Satoshi Nakamoto discovered that this technique could solve the “Byzantine Generals Problem”, so he introduced it into the Bitcoin blockchain network, and generally the PoW mechanism became one of the mainstream mechanisms in today’s blockchain.
Simply put, POW is to reward whoever does more work.
As we know, every node in the blockchain is free to pack blocks for rewards. So, with so many miners around the world, who actually packs the blocks?
The mechanism of POW stipulates that each miner who wants to pack a block needs to compete with others for the right to keep the books relying on their his computing power.
The greater the computing power is, the higher the probability of winning will be. Under the premise of uniform distribution, the proportion of “mining” is proportional to the amount of computing power they provide. In other words, the more power you have, the more you get.
So how do we compete?
To win, we need to solve a mathematical problem, which requires a large number of calculations through the computer, and whoever works out first will be able to keep the account and get the reward of the block.
The other miners who do not figure out the answer can only expect to be rewarded for the next question.
In addition, Satoshi Nakamoto has created a new question every 10 minutes in order to motivate miners. If there is only one person mining in 10 minutes, then the reward is for CoinBonus. The more people are involved, the lower the probability of winning will be. Therefore, it is better to participate earlier for higher profit, and this mechanism motivates a large number of miners to participate as early as possible.
As long as someone is trading with bitcoin, there are transactions waiting to be packaged, thus incentivizing miners to compete for arithmetic power and receive bitcoin rewards, ultimately forming a virtuous cycle that ensures the stable operation of the bitcoin system. According to the Bitcoin white paper, Bitcoin will be mined out in 2140. Some might say by that time there will be no more block rewards, won’t bitcoins be worthless?
In fact, Satoshi Nakamoto has already told us the answer: Bitcoin rewards include block rewards and fees, and even if there are no new block rewards by then, there will still be fee rewards.
Advantages of the POW Consensus Mechanism
From the principle of POW, it is not hard to see the advantages of POW as follows.
First, it is fair. The number of bitcoins a miner receives is closely related to the workload of him. The more effort he makes, the higher the reward will be, and no other factors will affect this result, so this mechanism is very fair.
Second, it attracts users at early times. The earlier you participate, the less competition there is and the higher the reward will be.
Third, the arithmetic mechanism gives bitcoin a certain value. Bitcoin is the product of competition by many miners who have invested enormous resources (computers, electricity). From an economic point of view, the opportunity cost of these resources is what makes Bitcoin valuable. Perhaps some people regard it as a huge waste of resources since huge investment is made to mine a thing without values. But isn’t mining diamonds a waste of resources, too? Since its advent a decade ago, the Bitcoin system has proven to be a very stable payment system running around the world, gradually gaining the recognition of many people, as to how the price of Bitcoin will eventually be, we’ll see.
Fourth, malicious action cost is high. The advantage of the PoW mechanism is that it allows each node’s computing power to be added to the network’s transaction authentication. If you want to do evil in the blockchain network based on the POW competition mechanism, you must have the absolute computing power of the whole network, or you will have to face competition from other people’s computing power. Theoretically, unless someone can hold more than 51% of the computing power of the whole network, nothing in the whole network can be tampered with. This makes the network more decentralized and malicious actions cost higher.
Of course, the POW mechanism has become increasingly difficult for individuals to mine due to its development, and a large number of professional mining rigs as well as large mining farms have emerged, which is contrary to the decentralization of Bitcoin.
Blockchain Open Course is an introductory course on blockchain by BiXiaoBao.
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References:
1. Blockchain Mechanism Algorithm — POW
3. Introduction to Consensus Mechanisms (POW, POS, DPOS, PBFT and POP)
