Mining is the process of obtaining new crypto coins in the blockchain by performing actions according to strictly defined rules (consensus).
Mostly often, two types of consensus are used in the cryptosphere, one of which is Proof of Work (PoW). PoW consensus is the process of obtaining new coins by solving complex mathematical problems with computers. Such a consensus is used, for example, in Bitcoin.
It is the dominant algorithm among the largest cryptocurrencies. It is used by Bitcoin, Ethereum, Litecoin, Dogecoin, Bitcoin Cash and Monero.
How does it work.
The miner’s equipment solves the cryptographic problem that the blockchain puts in front of him. In particular, this is how new blocks appear in the chain: the hardware must “solve” the problem in order to be able to create the next block. Solving is the simplest enumeration of millions of code combinations, however, requiring huge computing power and creating a proof of “work”. The proof of “work” is a unique value (hash).
As soon as the miner finds it, it sends the hash to other computers on the network for verification. Other participants can verify the hash against the task, but not use it to create a block. The hash key belongs to the miner who created it.
The peculiarity of the hash is its asymmetry – it is quite difficult for the miner to find, but it is easy for the rest of the network to check for compliance. In addition, each hash carries the information of the previous blocks of the network. This forms a confirmation that all actions were performed within the same blockchain.
What are the disadvantages of PoW
The first drawback is the harm to the environment. Mining consumes a monstrous amount of electricity. Computers wear out quickly, new ones come to replace them, and old ones are thrown away – this is how whole dumps of parts arise.
The second disadvantage is protection. Proof of Work only provides a sufficient level of security when there is a large group of miners competing for block rewards. If the network is small, the possibility remains that a hacker can get a simple majority of the processing power and reorganize the blocks as he sees fit. This is also called a 51% attack.