44

They try to find a random nonce (a little random data) that goes into a block and makes the block have a (SHA256) hash that (in binary) starts with a certain amount of 0's. The more zeroes the more rare hash is. A good hash' outcome is not predictable, and so you have to try a lot of times to find a good nonce. The amount of zeroes are based on how ...


40

Proof of Stake is basically a case of having your cake and eating it, too. PoW is a simple work-around to a coordination problem that was previously thought to be unsolvable. It sort of "cheats" by providing an economic solution to a distributed systems challenge, by introducing a real cost as a disincentive to unwanted behavior as well as using a ...


37

The Mining Algorithm is as follows: Step 0 - Retrieve the hash of the previous block from the network. Step 1 - Gather a list of potential transactions known as a "block". This list of transactions comes from the peer-to-peer bitcoin network. Step 2 - Calculate a hash for a block of potential transactions along with a random number. Step 3 - If the hash is ...


24

In Nextcoin, proof of stake is used. So the "mining" process there is just about holding coins and leaving your computer on. It doesn't involve powerful CPUs. Each block (every 60 seconds), a random Nextcoin is selected to be the next "miner". There are 1 billion coins so the odds of a single wallet being selected is the number of Nxt in that wallet ...


20

Forget PoW for a second: lets instead imagine that you have a box, and you've placed a lock on it, in order to secure its contents. Now, if someone asks you how secure the contents are, then the size and type of lock is fairly important. Tying the box closed with a bit of string isn't very good security, at least compared to a heavy-duty padlock. For an ...


19

I think there are at least four reasons: The miners are stakeholders in the bitcoin ecosystem. Mining solves a problem for them. Taking away PoW mining would make bitcoin no longer work for one of its most important group of stakeholders. Non-miners are in bitcoin because they like what bitcoin is. If they want some other consensus scheme, they know where ...


18

Solving SHA256 hash problems on Bitcoin is useful in the sense that secures the Bitcoin blockchain, but if your question is: "why can't it do something computationally useful as a side-effect?", then I think the answer is "we don't know how". For Bitcoin to work, the proof-of-work that miners do must have the following properties: Easy to verify solutions ...


14

I think there are some very convincing theoretical arguments to be made, but there is also just a very practical consideration: Right now, a very large portion of BTC is being held in the cold wallets of popular exchange platforms. Hardcore bitcoiners will shake their heads and declare "Not your keys, not your coins!", but this apparently has not stopped ...


13

The important thing here is, that every mining pool/solo miner is working on a different input: They have different coinbase transactions and are working on different sets of transactions. Further entropy can be added by changing the nonce and extra-nonce, by adding another transaction, or by changing the order of the transactions. While there can be block ...


12

Imagine I have 1 bitcoin. And imagine I can form a transaction to send that bitcoin to Alice or I can form a transaction to send that bitcoin to Charlie. Now, what stops me from forming both transactions? Nothing. So, if I do that, how will people know which transaction is valid? Clearly, without some reliable way to tell which of those two transactions ...


12

Proof of Work (PoW) basically makes sure that miners don’t cheat. There is no way to trust that everyone in the network is honest, so there has to be some way to prevent miners from creating new blocks that benefit themselves. The way it works is that you have a bunch of people all trying to guess the answer to the math problem and no one knows who is ...


11

Assume for a second that we found a proof of work algorithm that had all of the good properties of sha256, but was also useful for SETI and maintaining world peace. Now suppose a group of miners collectively have more than 51% of the hashing power. In which of the following scenarios are they more likely to collude to double spend via a 51% attack: A) When ...


11

As you mentioned, bringing coins into the network is one of the main purposes of mining. But this reward is just an incentive to do the other more important part of mining: 'processing' transactions. Immutability As detailed here, when a block has been solved, not a single bit can be changed without invalidating it. This means that all of the ...


11

There are multiple definitions of the term "double spending" at play here. First, there is the actual definition of double spending: to spend the same money multiple times. A simple example of this is the coin on a string in a vending machine. You put tie a string to a coin, when you put the coin in the machine, it thinks you paid, you get whatever you want ...


10

The time between consecutive blocks follows the exponential distribution, with mean (roughly) 10 minutes. This means that the variance is 100 minutes^2.


10

I don't know of any such list yet, but no reason we can't start making one. :) Others should feel free to add their findings via an edit. Proof of Work Proof of Stake Proof of Activity Proof of Storage Proof of Knowledge Proof of Stake Velocity Proof of Burn Dual Purpose Proof of Work (Primecoin) Proof of Lock (Tendermint) Delegated Proof of Stake (...


10

Proof of work does not create trust. It creates incentive. Miners are paid if their block is eventually part of the main version of history ("blockchain") that the network accepts. They must irrecoverably burn electricity in order to create blocks, which costs them money; money they only get paid for if their block "wins". These factors together mean that ...


10

Because each miner may select the transactions (and the order in which they are included) in each block. Also, they do not all start on the same exact nonce, in fact they are changing more than just the nonce in many cases (e.g. block versions - see ASIC BOOST). This means that they are not all performing the HASH256 (proof of work algorithm) on the exact ...


9

For Peercoin specifically, PoW and PoS blocks are independent. Just as you're betting your consumed electricity and CPU-time vs. the possible PoW-blok's reward, in the PoS blocks you're betting your coin-age: the amount oF PPC you own multiplied by the number of days they've sitted idly at your wallet. It must be a minimum of 30 and a maximum of 90 days for ...


9

Well, I know of one altcoin that does useful work: Primecoin. As Wikipedia describes it: Primecoin (sign: Ψ; code: XPM) is a peer-to-peer open source cryptocurrency that implements a scientific computing proof-of-work system. Primecoin's proof-of-work system searches for chains of prime numbers. Primecoin already has quite some world-record prime chains ...


9

Nothing directly prevents it in Bitcoin, and indeed the attack has been demonstrated on testnet3 many times---it's the primary reason that testnet3 currently has almost three times as many blocks as Bitcoin, despite being launched several years after Bitcoin mainnet and with a something similar to[1] Bitcoin's 10-minute average block interval. Indirectly, ...


9

In addition to the technical factors mentioned by MCCCS, it's important to consider economical factors as well. If the problem being solved has value outside of the Bitcoin network, it allows miners to essentially "double dip" on the rewards - they earn both from the Bitcoin received as block rewards, as well as the incentive structure off chain. ...


8

Not that other answers are wrong here, but just to approach your confusion from another angle: SHA256 hashing algorithm, which produces alphanumeric hashes. That's not true. The hashing algorithm produces a stream of bytes. Only when you display that bunch of bytes on your screen it's common for it to be in hexadecimal (containing "alphanumeric" ...


8

As long as both competing chain-tips are adhering to the same rules, the chain with the most aggregate difficulty ("heavier") will win, regardless of height. Nodes performing the initial sync would automatically end up on the heavier chain by comparing the aggregate difficulty of the chain-tips offered by their peers due to headers-first synchronization. ...


8

You are correct that effectively Bitcoin PoW involves computing the Merkle root every now and then in addition to the hash grinding. However, this is negligable. Even ignoring nTime rolling, the Merkke root computation is just a dozen or so hashes every 232. It's so little because not the entire Merkle tree needs recomputation; just the coinbase transaction ...


8

A Hash Function maps "data of arbitrary size to fixed-size values". As an incredibly simple hash, consider a function only works on numbers and simply returns the last 3 (decimal) digits (ie., the 1s, 10s, and 100s places). Using this simple hash, 5 would hash to 005, and 123,456 would hash to 456. A Bitcoin block contains a handful of fields (...


7

In my opinion, it is one of the greatest misconceptions about Bitcoin that miners solve a "hard problem". Many news sources explain it like that, but in fact it's not true. All a miner does is guessing until he got something right. A miners takes his block of transactions (including the coinbase transaction that sends the fees and block reward to himself) ...


7

Bitcoin mining is useful work, it secures the Bitcoin block chain. If you want to pay people to do other kinds of work, you can certainly do that, but that has nothing to do with Bitcoin mining. The work Bitcoin miners do is precisely the work needed to secure the Bitcoin block chain. There is no known way to make something be both protein folding and also ...


7

In addition to PrimeCoin, there was also PermaCoin proposed as a solution to archival of public knowledge: Excerpt from the abstract: We propose a modification to Bitcoin that repurposes its mining resources to achieve a more broadly useful goal: distributed storage of archival data. We call our new scheme Permacoin. Unlike Bitcoin and its proposed ...


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