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It’s an ingenious protocol but quite complicated. Why not just use a standard database decentrally to keep a ledger and compare it? That seems more efficient and more straightforward.
However, this poses problems for a decentralized project. After all, no central authority determines which ledger is correct. And with a monetary network, malicious people will, of course, try all kinds of things to attack the network. So it would help if you had something that creates and protects a decentralized consensus about the state of affairs.
The problem is as follows. Suppose one half of the network presents you with a false ledger while the other half presents you with the entire ledger; how do you know which of the two to believe as a new participant? It is the so-called Byzantine General’s problem, a famous mathematical problem in computer science, that Satoshi Nakamoto has solved.
In combination with the blockchain, the innovative thing about Proof of Work mining is creating a decentralized consensus on the network about ‘the truth.’ And it is also secured with all the computing power that has ever been put into it.
Simply lying and cheating does not work on the Bitcoin network because everyone has a copy of the blockchain to verify whether everything is correct. Therefore, if you want to attack the network, you will have to change the blockchain.
For that, you will have to create a branch of the blockchain from the point where you want to change the transaction history. It would be best to start mining on a competing blockchain from that point on, immediately lagging. You have to do all the ‘work’ again. Because of the cryptographic link in the blocks, you have to mine all blocks again afterward.
Since, according to the protocol, the longest blockchain is the real blockchain, you will also have to mine faster than all honest miners to catch up and stay ahead.
In theory, you, therefore, need at least 51% of the Bitcoin network’s computing power to have a chance at all, and in practice, probably more. Unfortunately, that means that you have to take over half of all existing miners or else buy more mining equipment than all miners worldwide already have. In addition to being incredibly expensive, this is practically unfeasible because mining equipment is almost always sold out. After all, bitcoin miners also continuously increase their mining power.
Power costs make an attack inherently costly. So if Bitcoin “uses as much power as a small country,” it would take about half that amount of power to attack the network. Again, a gigantic cost item, which grows as the network’s computing power continues to increase.
Why a Blockchain
The hacker must use the computing power and corresponding amount of power for as long as the attack lasts, and if you fail, it is a wasted effort and a total loss. The further you go back in time, the more fake blocks you have to mine again. And the longer you last, the more expensive an attack is. Moreover, the blockchain of the honest miners eventually gets longer when you stop, which means that all your work is destroyed.
With a successful attack, the possibilities are limited. For example, you cannot do transactions for which you do not have private keys. At most, an attacker looking to make a profit can try to create a branch of the blockchain with enough computing power to make a purchase and have it delivered, and then let the branch die so that the transaction never took place.
That is not very practical because it does require a multi-billion dollar investment in untraceable equipment that is subsequently only suitable for bitcoin mining, plus the considerable inherent power costs. So try to make that profitable.
In short, Proof of Work mining and the blockchain attack would be costly, very risky, practically unfeasible, and almost always loss-making. The more computing power bitcoin miners deploy, the stronger this security mechanism is. The power consumption and associated power costs add actual costs and force a cost-benefit analysis on potential attackers, which is consistently negative.
Bitcoin miners, therefore, not only process the transactions but also secure the network with their computing power. The blockchain serves as a means to achieve decentralized consensus and to protect the transaction history.
Proof of Work
Proof of Work is the only consensus protocol that has successfully established a decentralized and self-sufficient network, on which decentralized consensus has emerged and is ensured through a self-reinforcing mechanism. That is special, unique, and highly unruly. That is why the Bitcoin network is the most secure in the world.
The Bitcoin protocol, the blockchain, and the Proof of Work mining operation are well-considered. Other consensus protocols exist, but most have been deprecated during an earlier stage of Bitcoin development because they come at the expense of decentralization.
Decentralization is the revolutionary, most important, and perhaps the only real innovation of Bitcoin. The others that existed before: blockchain, Proof of Work, tokens, smart contracts, and cryptography are all not new.
What is new, exciting, and innovative is the carefully balanced combination of technologies that have created a self-sufficient and unruly decentralized network with its digital economy. But, of course, all other technological gadgets can be built on top of that; the base layer must be reliable and decentralized.
Useful or waste?
To secure the network and ensure decentralization is why essentially, Bitcoin consumes so much power. Is that wasted or useful? That depends on whether you think a decentralized network and a decentralized economy are valuable or not.
Bitcoin is the first and only truly global currency. That in itself is unique. It is not the currency of America or China, nor any company, but a global currency that belongs to no one and therefore belongs to all of us. There are many apps available where you can trade bitcoin using Bitcoin Buyer, to know more, click here. It is a public good, and the benefits are countless: better monetary properties, technologically superior, inherently digital, no intermediaries needed, no abuse of power possible, financial sovereignty, censorship-resistant, cross-border, inclusive, open, independent, politically neutral, and accessible 24/7.
Thank you for reading!