Proof of Work (PoW) is a protocol that has been created for the prevention of attacks aimed at disrupting the operation of a system and unwanted messages sent by e-mail called Spam. The Proof of Work protocol originated in a 1993 paper by computer experts Cynthia Dwork and Moni Naor. By 1999, it was included in the literature with the efforts of researchers named Markus Jakobsson and Ari Juels.
During the development of PoW in the nineties, the most common usage area was to prevent moves to render computer systems inoperable, especially DDoS (Denial of Service) attacks. Likewise, the Proof of Work protocol was used to prevent spam. On October 31, 2008, in the Bitcoin whitepaper published by someone or someone named Satoshi Nakamoto, it appeared in a different form from previous usage areas. The document named "Bitcoin: Peer-to-Peer Electronic Cash System", which revealed the first cryptocurrency Bitcoin, revealed how a reliable payment system and cryptocurrency can exist thanks to the Proof of Work protocol.
Proof of Work, included in the fourth article of the said document, answers questions about why this mechanism is included in the Bitcoin infrastructure.
How Proof of Work Works
Bitcoin and many other cryptocurrencies are blockchain systems protected by networks of decentralized nodes. The main task of these systems is to ensure the sustainability and continuity of the network. There are operators on the network called miners, who are tasked with adding new blocks to the blockchain. Adding these blocks is possible by solving some complex mathematical problems. Since it is very difficult to solve these problems, powerful processors are needed.
The first miner who solves the problem and verifies the transactions in the block broadcasts the transaction to the network, earning the cryptocurrency reward determined in the network and the transaction fees paid for the transactions in the block. Transactions published on the network verified by miners are recorded in a distributed ledger system called a blockchain. All users connected to the network can download a copy of the blockchain and at the same time perform verification of all approved blocks.
What are the Advantages and Disadvantages of the Proof of Work Protocol?
Proof of Work, the most common and fundamental protocol in the cryptocurrency industry, offers radical changes in technology and economy by allowing a payment system and currency to work without a central authority. For example, computing power is used as one of the important mechanisms that ensure the security of data in the network. Thanks to the Proof-of-Work protocol, at least 51 percent of the computing power in the network must be captured in order for attacks on the Bitcoin network to be successful. Considering the size of the Bitcoin network and its high computational power (hashrate) today, such an attack is unlikely to succeed. Computing power represents the number of attempts the processors in the network can make in one second and can be thought of as the verification power.
Although the obligation to capture most of the computing power to take over the network is seen as one of the biggest advantages of the PoW protocol due to the security it provides, experts also express the concern that this may lead to monopolization. So this huge advantage becomes one of the biggest disadvantages of the PoW protocol at some point. Because the processors with the largest share can have the highest voting power in the network. The principle of decentralization, which is the most important feature of the Bitcoin network, creates a contradiction with the network principles due to the risk that the strong can easily gain authority.
Active Bitcoin mining pools are very unlikely to capture 51% of the network's processor power. However, in 2017, the mining pool managed by the mining device manufacturer Bitmain managed to reach 45% of the processor power in the network.
Because a system based on the PoW protocol requires high processing power, it leads to very intense energy use. This situation can lead to both high costs and the irresponsible use of energy resources.