Challenges With PoW

The Proof-of-Work consensus mechanism has some issues which are as follows:

• The 51% risk: If a controlling entity owns 51% or more than 51% of nodes in the network, the entity can corrupt the blockchain by gaining the majority of the network.
• Time-consuming: Miners have to check over many nonce values to find the right solution to the puzzle that must be solved to mine the block, which is a time-consuming process.
• Resource consumption: Miners consume high amounts of computing power in order to find the solution to the hard mathematical puzzle. It leads to a waste of precious resources(money, energy, space, hardware). It is expected that 0.3% of the world’s electricity will be spent to verify transactions by the end of 2028.
• Not instantaneous transaction: Transaction confirmation takes about 10–60 minutes. So, it is not an instantaneous transaction; because it takes some time to mine the transaction and add it to the blockchain thus committing the transaction.

Proof of Work consensus is the mechanism of choice for the majority of cryptocurrencies currently in circulation. The algorithm is used to verify the transaction and create a new block in the blockchain. The idea for Proof of Work(PoW) was first published in 1993 by Cynthia Dwork and Moni Naor and was later applied by Satoshi Nakamoto in the Bitcoin paper in 2008. The term “proof of work” was first used by Markus Jakobsson and Ari Juels in a publication in 1999.

Cryptocurrencies like Litecoin, and Bitcoin are currently using PoW.  Ethereum was using PoW mechanism, but now shifted to Proof of Stake(PoS).

Principle: A solution that is difficult to find but is easy to verify.

Purpose of PoW

The purpose of a consensus mechanism is to bring all the nodes in agreement, that is, trust one another, in an environment where the nodes don’t trust each other. 

• All the transactions in the new block are then validated and the new block is then added to the blockchain. 
• The block will get added to the chain which has the longest block height(see blockchain forks to understand how multiple chains can exist at a point in time). 
• Miners(special computers on the network) perform computation work in solving a complex mathematical problem to add the block to the network, hence named, Proof-of-Work. 
• With time, the mathematical problem becomes more complex. 

Features of PoW

There are mainly two features that have contributed to the wide popularity of this consensus protocol and they are:

• It is hard to find a solution to a mathematical problem.
• It is easy to verify the correctness of that solution.