One of the potential flaws a cryptocurrency can have is the occurrence of double-spending. Since this unique form of money runs and operates via technology, there’s a possibility of encountering a series of technical glitches and hurdles along the way. 

Interestingly, that’s what Bitcoin and the powerful technology behind it intend to prevent, but how can that brilliant idea be executed? One of the drivers to make it possible is the mechanism called the Proof of Work (PoW). But before we dive deeper into that, let’s first talk about the problem it deals with—double-spending.

The problem of double-spending

In the crypto world, double spending is defined as the risk that a cryptocurrency can be spent more than once. Double spending isn’t very much a problem in government-issued money or cash, since they’re in the forms of bills and coins. 

When you buy a slice of strawberry cake and you pay it in cash, you’ll hand over the money to the cashier. Eventually, your payment will be kept inside a cash register. You can’t buy a cup of coffee or another slice of cake from the cafe across the street using the same bill.

On the other hand, that scenario can take place with digital currency payments. Because of the digital format of cryptocurrencies, there’s a possibility that the data can be duplicated or copied—it’s like copying files from a computer to a flash drive or email addresses of many users across the web.

When your digital money is copied and used in various transactions, chances are: your money will fall flat. There will be problems with its authenticity, privacy, and usage. But how do cryptocurrencies, especially Bitcoin, prevent double-spending? Let’s recall the basics of Bitcoin and its network. 

A quick review of the Bitcoin blockchain

If you remember your lesson about what Bitcoin is and how it works, you can probably recall that this leading cryptocurrency runs its operations on a robust network called the blockchain. This shared public ledger is responsible for recording all the transactions confirmed on the network. Simply, blockchain is like your bank passbook where you keep all your transaction records.

Now, the Bitcoin blockchain is not only independent but also transparent. Unlike your bank passbook that you usually keep inside your bag or along with the other important documents you have, transactions recorded on the blockchain are open to anyone on the network.

Every transaction made on the Bitcoin blockchain undergoes confirmation and after it is validated, this transaction will be posted and broadcasted on the network. When this happens, every user on the network or database can view the transaction and that’s the time when it becomes irreversible.

A cryptographic protocol is used to verify the data on the ledger. Aside from the blockchain or decentralized public ledger and the cryptographic keys, there’s also this technology called the Proof of Work.

What is Proof of Work?

In the blockchain, Proof of Work is a consensus algorithm first implemented on Bitcoin to validate transactions on the network. The blockchain works like a big database where every user can know whether funds are being spent or have been spent before. In other words, it records the whereabouts of a transaction.

Let’s say you received a $50 bill as payment for your side hustle. Later in the afternoon, you used this $50 bill to pay for a cup of coffee and a box of pastries from your friend’s coffee shop. Now, that cash was kept inside the cash registry for quite some time. Not long after, that $50 bill from you was given as change to another customer, who later used it to buy chips from a nearby convenience store.

Come to think of it; it’s a bit complicated to track the whereabouts of that $50 bill. If we’re going to write down on a paper where it was and where it went, it will probably look like this:

Job salary ➔ You ➔ Cafe ➔ Customer ➔ Convenience store 

Now, our record only contains five transactions on which that $50 bill was used, but can you imagine how hard it would be to record every transaction where that specific paper bill was involved? That’s precisely how Bitcoin transactions are recorded on the blockchain. Mind-blowing, right?

How does PoW work?

So how do Bitcoin and Proof of Work go hand in hand? In the example we have above, transactions are recorded one by one, but on the Bitcoin network, each transaction is collected and merged into blocks. A block is like a page on your passbook comprised of various transactions.

It’s important to note that it’s not only the process of confirming a block that’s difficult but also creating a block itself. This is where miners come in. These miners are the ones that create blocks using their resources, which include computing power used to hash the block’s data until there’s a solution to the complex mathematical problem.

Let’s say you sent 1 BTC as payment for a luxury watch. That transaction will be automatically registered on a block along with other transactions. This will be communicated to the blockchain where either the miners or computers use their computing power to confirm and validate the transaction.

The miners solve complex mathematical problems to validate the blocks and confirm the transactions. They use high-powered equipment, specialized software, stable Internet connection, high levels of electricity, along with a lot of patience and time.

After finding the solution to the complex mathematical algorithm, the miners will receive rewards in the form of transaction fees or cryptocurrency. The complexity of the process adds up to the costs and paves the way to avoid cheating. No one would want to go through that tedious process and miss out on the prize at the end, right?

Importance of PoW work on the blockchain

Proof of Work in blockchain provides trust in a trustless environment. Since it’s impossible to compromise, the miners follow the network rules and compete to get the reward for the next confirmed block. PoW protocol also ensures that there won’t be excessive mining on the network. With the trust that Proof of Work allows, the network will keep operating and rewarding miners.

Aside from that, the Proof of Work protocol provides a solution to cryptocurrencies’ most common problem: double-spending. PoW is hard proof that Bitcoin won’t really need any governing or central authority to operate its fascinating works and systems. 

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