Ever wonder how to mine Bitcoin? Bitcoin mining centers around proof-of-work (PoW), a system that enables safe transactions for peer-to-peer networks. AKA, PoW keeps miners from cheating.
In this article, we’ll cover how blockchains incorporate proof-of-work, why it’s important, and how proof-of-work will evolve in 2022 and beyond.
Every blockchain requires a unified system to validate transactions and mine new tokens. This unified standard gives blockchain technology its utility as a reliable medium of exchange.
To operate a financial transaction, some blockchains require miners to show proof of work. This ensures 1) transactions are legitimate and 2) new tokens are validated. If a miner can’t prove their work, the transaction can’t be completed.
Under a proof-of-work model, blockchains rely on complex mathematical puzzles to validate new blocks. These systems prevent malicious actors by preventing the use of holdings more than once, or the use of fraudulent tokens.
In blockchain tech, each token and transaction is unique, allowing for the development of a permissionless, decentralized financial system. Bitcoin is the most prominent example of a proof-of-work blockchain network. But other large networks like Ethereum also incorporate PoW.
As more blocks are validated on-chain, puzzles for proof-of-work become more complicated. The consensus algorithm adjusts over time based on collective computing power. The system is designed to keep block production rates stable. Otherwise, new tokens would be rendered worthless.
In this light, it is not easy to mine popular coins. While over 90% of all Bitcoin is mined, many experts like @Waltzinthestreet believe the remaining 10% will never be collected in our lifetime. This is due to the complex nature of the work required to mine the remaining blocks.
You may be familiar with the criticism of proof-of-work. It has a massive energy requirement, as mining operators around the world must keep the lights on to compete and collect as many coins as possible.
With that said, the majority of Bitcoin miners use renewable energy. If proof-of-work can rely on sustainable energy, it is still an effective model for enabling a decentralized, permissionless blockchain network. Hence why Bitcoin maxis cling to proof-of-work as retaining the true OG values of cryptocurrency.
But in general, proof-of-work is largely seen as slow and inefficient. I think Bitcoin may always be a PoW blockchain, but you won’t see many new networks popping up incorporating that model.
Other popular blockchains like Cardano and Polkadot use proof-of-stake as a competing alternative to PoW networks. Ethereum itself started on proof-of-work, but has slowly adopted a hybrid model to keep up with market demands, and will incorporate proof-of-stake on a wider scale under Ethereum 2.0.
