Why Bitcoin Creator Satoshi Nakamoto’s Original Proof-of-Work (PoW) Model Works
Satoshi’s Original Proof-of-Work Model Works
In a blog post, Dan Held decided to explain how the original proof-of-work (PoW) concept works. This PoW is one of the most important parts of cryptocurrencies and is related to Bitcoin’s success. However, there are some PoW opponents that claim that the PoW system consumes important amounts of energy and that is not sustainable for the long term.
Dan Held was able to explain why this system clearly works. Moreover, he is able to show the fallacy behind the arguments that opponents give.
Held explains that everything what we do in the world is related to energy consumption. He showed a chart from the BP Statistical Review of World Energy 2014, in which he shows that the energy consumption has linearly increased as GDP grew.
Satoshi Nakamoto explained how the PoW concept works using ‘hashes via the conversion of energy.’ Bitcoin is a commodity which is minted from energy, and he calls it the ‘fundamental commodity of the universe.’
Held comments that Bitcoin’s ledger is immutable if it’s expensive to produce. The public ledger is secured by the hashing power of everyone mining Bitcoin. That means that PoW is a real feature and not a problem.
There are experts that have been attacking the PoW mechanism and cryptocurrencies for the energy consumption that they are related to. However, Held remarks that more transactions is not related to an increased energy consumption.
Additionally, blockchain has proved that, as time passes, it becomes much more efficient. Mining operations can be moved, something that means that big companies would locate their mining rigs close to places with less expensive resources. This is quite important since renewable energy sources have predictable capacity that is generally wasted.
Energy producers can plug in miners, and store the excess of power holding Bitcoin or another PoW cryptocurrency.
Cryptocurrency mining activities are very important for the crypto ecosystem. As it continues to grow it will become much more efficient and it will help the world create more and more value.