Transactions on the blockchain need to be verified by miners. How this works is that a miner verifies a block of transaction through solving a mathematical puzzle based on prime numbers.
Blockchain consensus confirms the completion of the transaction/work and a new block is created. Each block gives a certain number of rewards to the miner that completes the transaction.
The completion of one of these mathematical equations is called a hash and as time goes on, the difficulty rate for each puzzle increases and this is called the hash rate. This also means that more processing power is required to solve each mathematical puzzle as time goes on.
Proof of Work Implementation
One of the most popular implementations of the Proof of Work is the blockchain for bitcoin and the puzzle that is used is called ‘Hashcash’ and this is also applied for other cryptocurrencies such as Litecoin and Ether. The network behind bitcoin also changes the complexity of the puzzle based on the total power of the network.
Drawbacks of Proof of Work
Some of the drawbacks of the system are the huge power expenditure required to perform the transactions and as such, miners often form mining pools in order to pull together their computing power and split the rewards after mining a block.
Another major fallback which led to the popularity of the Proof of stake system is the 51% attack. A 51% attack is a situation in which a group of users or a single user controls a majority of the mining power. This means that they can create false transactions for themselves and invalidate the transactions of others.
This sort of attack has grave consequences on the blockchain as it is considered a compromised one and will usually lead to miners leaving the system and the value of the cryptocurrency in question reducing significantly.
