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What is Proof of Work and Why It's So Important for NFTs?

The main reason why cryptocurrencies and non-fungible tokens (NFTs) are becoming popular today is because of the level of security they offer through the proof of stake (PoS) and proof of work (PoW) concepts. With these two algorithms, cryptocurrency users can minimize the crime rate that occurs with this technology.

So, what exactly is the PoW concept, and how does it help blockchain and NFT implementations today? Moreover, how different is PoW compared to PoS in blockchain?

What is PoW


Since the cryptocurrency blockchain does not have an authority working to secure the entire platform, other means must be used to make the platform safe from all threats. This method is to use the PoW algorithm. So, what kind of algorithm is this?

Simply put, the PoW is an algorithm created by the efforts of several platform users to solve a series of common mathematical problems found in a blockchain. With the participation of all of them, no single person can monopolize the platform for their own benefit.

How Does it Work?


poW Work

Since Bitcoin is one of the biggest blockchains that people use today for their cryptocurrency needs, let's understand how PoW generally works in a blockchain. In this regard, new blocks can be created if a new transaction has just been made. In order to secure a newly created block, blockchain users can use what are known as "hashes" to secure the block. Hashes are a series of long strings of numbers that are proof of transactions and validation of the transaction process that was just carried out.

Great care is required in creating new hashes so that the transaction can be further validated and the blocks created from it can be added to the blockchain. Therefore, the slightest change to the data contained in a hash can make it different from the data obtained from the previous transaction process.

To handle the computing process of complex mathematical problems in a blockchain, mining devices are needed to deal with all these computing processes. In this case, the hashes have a "target" that cannot be exceeded if we want a new block to be added to the blockchain.

Then, the mining process through creating a new hash can only be done once every 10 minutes to avoid too many mining processes happening simultaneously. Even so, the process of earning prizes in bitcoins through adding new blocks is more akin to a lottery than a running race. Therefore, the mining process can be a very competitive process.



Prood of Work Example

Now that we know the complexities of creating a hash and a new block, let's take a look at an example of creating a new block complete with its rewards. Now that we know the complexities of creating a hash and a new block, let's take a look at an example of creating a new block complete with rewards. For example, the hash of block #741305 was successfully created on June 19, 2022. The hash listed for this block is 000000000000000000050bfd0d3214422e63704a25b4dfd7ee98f6e9595645cb in exchange for 3,990.5 BTC.

From this series of hashes alone, the existing transaction data must be written completely and carefully. Otherwise, the blockchain will assume that there has just been a fraud attempt by replacing the numbers in the hash.

Importance of PoW for NFTs


PoW for NFTs

Why is proof of work needed to secure blockchain, especially for NFT buying and selling activities? This is due to a "double-spending problem", an event where the cryptocurrency in our wallet is reduced due to an error in the blockchain system.

Basically, double spending is an event where a blockchain user prints out bitcoins that are double the amount they should have earned. If left unchecked, the number of bitcoins in existence could spiral out of control and the entire currency would lose value due to an imbalance in supply.

In all due honesty, this problem can be easily overcome in payments facilitated by a centralized technology company that can monitor changes in the amount of money in a person's wallet. But since there is no such authority in the blockchain, steps like PoW must be taken to maintain security.

Moreover, many people are buying and selling NFT using Ethereum and Bitcoin as their main currency. With the risk of double-spending that can disrupt the supply of bitcoins and reduce the amount of one's wallet balance, the PoW continues to be relied upon because of its complexity in mitigating crime.

In addition, the cryptocurrency reward feature in PoW can motivate people to mine according to a predetermined workflow. Once rewarded, miners can earn crypto rewards that can be used to buy NFTs and support creators who depend on the design of NFT artwork for their livelihoods on the market.

Related Article Very Easy! 6 Ways on How To Become NFT Creator!

Difference from Proof of Stake (PoS)


Proof of Stake

Although PoW has proven to be an effective way to reduce crime rates for manipulating blockchain for personal gain, a fatal drawback of PoW is the high emission level it creates from the process of securing block transactions. The problem is, with today's level of technology, the PoW has not been designed to be completely eco-friendly.

The most popular alternative to PoW today is proof of stake (PoS), a type of algorithm similar in function to PoW in securing transaction blocks. Unlike PoW, PoS relies on the amount of cryptocurrency a person owns or stakes in the blockchain.

As a result, PoS does not require the number of computers and equipment that PoW needs. From this, we can see that the emission levels that arise from the implementation of PoS will not reach the emission levels from the ongoing PoW process.

However, the PoW is more secure in the context of blockchain security and prevents an imbalance in bitcoin supply in the process of buying and selling NFT transactions. Until blockchain developers can design more environmentally friendly PoW, cryptocurrency users will still rely on more secure PoW.

Regardless of the difference between the two, people will continue to use proof of work and proof of stake algorithms to secure their transactions. Therefore, they will continue to be used as trusted algorithms in securing the blockchain.

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