Crypto ELI8: Proof-of-Work
Understanding how the bitcoin network achieves consensus and security
The Crypto ELI8, or Explain Like I’m Eight, series is for anyone who wants to learn about the exciting world of cryptocurrency. Each post is organized around a specific term, concept, question, or other topic related to crypto.
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Have you ever played with a sliding puzzle? You know, those ones where you have to slide pieces and rearrange them to make a certain image? If you haven’t (or even if you have and want a fun challenge!) check out this free online version from gamesgames.com.
Proof-of-work is sort of like the sliding block puzzle game.
One year, Justin Bieber gives 210 concert tickets to your school. Since there aren’t enough tickets for everyone and since not everyone is a Belieber, your principal decides to organize a game to determine how the tickets are distributed. Only people who take part in the game can win one of the original 210 tickets. In order to take part, you have to download a special app.
The game is 210 rounds, or 1 round for each ticket. In order to win a round, a player has to solve the slider puzzle in the app. Once someone solves the puzzle successfully, they click “I WIN!” in the corner of the screen. This notifies the other players and a picture of the winning image pops up on their screens. If the image is incorrect, the players click thumbs down and the round continues. If the image is correct, the players click thumbs up, and a ticket is sent to the winner’s account. A scoreboard is updated and the next round starts with a new puzzle to solve.
210 tickets really isn’t that many so, in order to make it more fair, the size of the puzzle adjusts for every person that joins or leaves. For example, if only three people are playing then the puzzle is only 3x3. Then if seven more people decide to join, the puzzle is 10x10 so it’s a lot harder. It works the other way too. If two of the ten kids playing need to log off to do their homework, then the puzzle is 8x8.
So, what’s proof-of-work?
Proof-of-work is kind of like the game’s rules for winning a ticket. In order to play the game, you need to have the app. In order to win a ticket, you have to solve a puzzle within the app. Everyone playing the game is racing to solve the puzzle first. To make sure people don’t cheat and say “I WIN!” even though they haven’t actually solved the puzzle, other players need to confirm that the solution submitted is actually correct. Once enough players confirm the solution is correct, the app sends a ticket to the winner’s account and the next round starts with a new puzzle. To keep things interesting and fair, the more players who join the game, the harder the puzzle gets.
With cryptocurrencies, proof-of-work is what’s called a “consensus mechanism”. This is a fancy way of saying it’s part of the rules that helps the players trust that the game stays fair. There are different types of consensus mechanisms, such as proof-of-stake and proof-of-importance, but proof-of-work is one of the most popular.
For example, bitcoin, one of the most popular cryptocurrencies, uses proof-of-work. In bitcoin, the players aren’t people but big and strong computers. The computers compete against each other to solve a super hard math problem. The problem is even harder than solving a slider puzzle that’s 1 million x 1 million!
Just like the puzzle game, once the first computer thinks it’s solved the math problem, it shares the solution with other computers it’s connected to. The other computers review the work and, if it looks good, they tell the computers they’re connected to and so on. Then, the computer who solved the problem gets the prize, which is more bitcoin.
Proof-of-work is how the game stays honest and fair. It does this by giving players a puzzle to solve. The more players, the harder the puzzle. To win, players race each other to solve the same puzzle. Once a player thinks they’ve solved the puzzle, they share their solution with other players. If the other players confirm the solution is correct, the winner gets a prize and the game starts over.