If you have ever heard of Bitcoin in passing then you’ve probably heard someone attempt to explain what is Proof of Work (PoW).
Trying to understand all of this jargon can be daunting but if explained easily it can be the difference between not understanding and staying away and understanding and possibly investing.
You see, when the code for bitcoin was being written, there was an unsolved problem. This problem plagued other previous iterations of cryptocurrency projects. How to secure a network and how to stop nefarious actors from spoiling the party for others?
Before we start, I must say that the concept of PoW is not new. The inventor or inventors of bitcoin borrowed parts of previous iterations of a cryptocurrency and studies in computer science to create bitcoin.
PoW is showing proof that you are committed to securing the network. The network we will be speaking of in this example is bitcoin’s blockchain. The proof is allotting CPU power and electricity. The thought process in this is if you contribute energy to the blockchain then that is one way in many to decrease the chances of the network being compromised. PoW is in conjunction with mining.
Mining is the act of taking that energy you contribute to competing to win the chance of adding a new block of information to the blockchain and by doing so securing the network.
Your next question why give energy that you have to pay for just to win the chance to add blocks of information? You are incentivized to do so.
You see, every ten minutes someone wins the privilege to add a block of information onto bitcoins blockchain. As of the time of this writing, incentivization is 12.5 bitcoins which equals a little over $141,000. Like I said earlier, this happens every ten minutes.
To recap. You contribute computing power and energy to win the opportunity to add a block of information to the bitcoin blockchain and in turn, you’re rewarded 12.5 bitcoin to do so which as of now equals a little over $141,000.
Are you interested in mining now?
I must say though, you are competing with the world, with institutions, with entrepreneurs, and at least hundreds of thousands of other people for that big payout.