Proof-of-Work (PoW) Blockchains, and Why They’re Obsolete into the system and the way in which miners are incentivized to keep the network running and secure.

A Proof-of-Work blockchain is a consensus algorithm in which miner’s compete with one another to be the first to correctly solve difficult mathematical puzzles in order to receive a share of the newly minted coins.

This process results in every transaction on this network with a corresponding fee. Miners that successfully mine blocks on this network are rewarded with new coins and transaction fees as well as other benefits like storage space for transaction data or even staking their coins in order to gain priority when making future block additions.

This article will explore why you should not adopt a Proof-of-Work (PoW) blockchain today, what alternatives may exist for this type of blockchain, and how switching over can be made painless for your business.

What is a Proof-of-Work (PoW) Blockchain?

A proof-of-work (PoW) blockchain is a consensus algorithm in which miner’s compete with one another to be the first to correctly solve difficult mathematical puzzles in order to receive a share of the newly minted coins.

This process results in every transaction on this network with a corresponding fee. Miners that successfully mine blocks on this network are rewarded with new coins and transaction fees as well as other benefits like storage space for transaction data or even staking their coins in order to gain priority when making future block additions.

This approach rewards miners in a fashion that incentivizes them to keep the network secure and up-to-date. They are also rewarded for their efforts in validating new blocks and adding new content to the blockchain.

Why adopt a Proof-of-Work (PoW) blockchain?

When a business purchases a server, they are often required to install software that runs the server’s operating system as the “root” account. This root account oversees all of the actions taken by the server, including the ability to authenticate users and authorize them to access data.

This type of setup often results in a single point of failure, as the server’s root account can be circumvented with ease by nefarious actors. In addition, a single points of failure can be expensive to maintain, as administrators must keep an eye on the server’s activity in real-time.

Some companies have also begun to implement a “cloud-first” philosophy, relying on private cloud hosting rather than on public cloud infrastructure. In this environment, however, there is a single point of failure as the private cloud also contains the production environment, which can be compromised in many ways.

A blockchain-based solution can be implemented by making use of “smart contracts,” which are computer code that can self-execute based on pre-defined conditions.

With a smart contract, the risk of a single point of failure is eliminated as the entire system can be self-executing. This eliminates cost and administration issues inherent to cloud-based hosting.

How PoW blockchain differs from proof of stake (POS)

A proof-of-stake (POS) blockchain is a consensus algorithm in which holders of cryptocurrency holding a certain amount of tokens (i.e. coins) are the “stakeholders” of the network.

In this model, new coins are generated based on the balance of the existing coin supply. This method of generating new coins does not use any mathematical puzzles to validate transactions.

Rather, the blockchain simply “forges” the new coins and then distributes them to the holders of valid coins. A problem with this approach is that it depends on the existing coin supply being held by a healthy portion of the network.

If that portion is reduced by a malicious actor, then the coins issued in response to that malicious act will be worthless. Additionally, the “forging” process used by a POS system is completely random, which inherently creates uncertainty over the long-term availability of coins.

If a malicious actor were to conduct a 51% attack and steal the entire existing supply, then the blockchain itself would become irrelevant and the attackers could just as easily steal the stake held by legitimate actors.

The benefits of adopting a PoW blockchain

Self-executing code – Since every blockchain transaction is public and verifiable, you can guarantee that any action was taken in the consensus mechanism that created that transaction.

This type of blockchain can be implemented quickly and with a limited amount of resources because it doesn’t require special software to be run on endpoints. No need for a dedicated server – With a PoW blockchain, you won’t need a special server to host the blockchain data. All you’ll need to host the blockchain data is your Web browser (or other Internet browser).

This lets you host the blockchain data in a private data center or on a single server. Cost-effective solution – A blockchain-based solution can be implemented quickly and cost-effectively.

The total cost of implementation is based on the implementation of the blockchain technology, but cannot exceed the cost of the underlying hardware. Predictable and standardized solutions – A PoW blockchain is not designed to support a large number of edge cases or different technologies. It is designed to be generic and provide predictable solutions that are applicable to many industries.

Conclusion

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