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Episode 4: Hey, I’m Not Lazy...I Even Have Proof of Work!

What is Proof of Work?PoW is a protocol, or accountability system, that deters service abuses like denial of service attacks and spam. Hashcash is an early version of this technology, and is used in email systems, blogs, and other digital networks to deter spam attacks. In blockchain systems, the technology is inverted. The Proof of Work hash protocol is used as an enabling device to allow decentralized participants to transparently append blocks of transactions to an existing chain of prior transactions. The Bitcoin blockchain network, the first functioning “chain of blocks” as it is called in Satoshi’s whitepaper, employs a hash-based Proof of Work concept.

What is a hash?Hashing functions take an input and produce an output. They are digital code that represent transactions, or a set of transactions contained in an information “block”, which is recorded on a blockchain. A blockchain is simply a digital, open, immutable ledger of transactions.

Algorithms are used to make hashes from inputs, or transactions that would like to be attached to the open ledger, or blockchain. Imagine you have a dialogue box, and in it you can record all the details of the transaction that you would like to be recorded on the blockchain, literally anything that you can type on a computer. Once you finish inputting the transaction details into the dialogue box of the algorithm program, which in bitcoin’s case is SHA-256, the algorithm calculates a hash from the input. What’s magical about math is that the same input will give the same output every time. But a change in the input will result in a new randomized, yet consistent, hash as an output. The output is always a specific length, and consistently so. Isn’t math wonderful?Why talk about hashes?The SHA-256 algorithm serves as a security measure and optimization tool. The blocks in a blockchain are “hashed”, or encoded into a series of numbers and letters. The use of hashing means that anyone dealing with a blockchain must remember the hash and not the input itself. In addition, each block will contain the hash of the previous block header, so that it maintains its place in the sequence of transactions recorded on the blockchain.MiningDecoding and encoding the blockchain is called mining, an essential part of the decentralized system of accountability that makes blockchains so unique and valuable. Mining involves computers running hashing algorithms to process the most recent block, with the information needed in mining or decoding being found in the information block's header. The cryptocurrency network sets a target value for this hash – the target hash – and miners try to determine this value by testing out all possible values.Here is where the economics comes in. The Bitcoin system rewards miners for their part in the distributed accountability network by providing cryptocurrency to the owner of the GPUs that successfully guess, or verify, the hash code. In other words, mining Bitcoin describes the process that a computer undertakes to confirm the pseudonymous transactions on the Bitcoin blockchain that is rewarded by the blockchain network’s cryptocurrency. In short, this protocol is called Proof of Work. When a Bitcoin miner is able to successfully confirm a hash (essentially a guessing game process), the Bitcoin system rewards the miner with digital cryptocurrency, 12.5 Bitcoins to be exact. At least until the next time the reward mechanism is halved in May 2020.

And we'll see you...on the moon!Resources:On Trust & Blockchains http://bit.ly/2Dr2C5zWhy Mine Empty Blocks? http://bit.ly/2ThTsO3What is Blockchain? http://bit.ly/2zf23Zq

Find us at http://bit.ly/BlockRunnersDigi B (Chris Barnett) Twitter: @cbvidsProfessor K (Nic Krapels) Twitter: @shanghaipreneurMr. Lo (Amal Sudama) Twitter: @cdsudama