Miners compete to solve complex mathematical problems using inputs from previous transactions, which incentivizes them to validate legitimate transactions while preventing cheating or double-spending. The result of each transaction is included in the next folder, forming a chain of results that allows for easy verification and prevents fraudulent activity. This process may seem inefficient at first glance but it’s automated and doesnt require any manual work from users making blockchain transactions.
In order to add a timestamp to the network, a miner must be the first to complete a cryptographic puzzle, then spread the result to the nodes on the network, which verify the answer. The cryptographic puzzle requires a significant amount of computational resources, and miners complete it in the hope of solving the block and receiving the reward. The reward is currently set at 12.5 bitcoins.
If a miner creates a block that does not match the results of the rest of the network, the block will be left behind, and the resources that they expended will have been wasted. Excluding exceptional circumstances (such as a 51% attack), it is more profitable for a miner to act honestly, rather than attempt to disrupt the network or post fraudulent results.
This proof-of-work mechanism is what keeps the network honest. If someone wanted to alter or tamper with a block, they would have to completely redo the work of solving the block. The further back a block is on a chain, the more difficult it is to tamper with. This is because all of the blocks that come after it would also need to be altered.
This proof-of-work system is based on the SHA-256 algorithm. Its suitable for the systems needs because it is relatively difficult to compute the solution, but easy to verify it.
Proof-of-stake alternatives have emerged to make the verification process more efficient. Proof-of-stake blockchain protocols have varying techniques, but they generally involve choosing the creator of the next block based on a combination of randomness and coin age or wealth. The amount of coins that a user has, or alternatively, how long the coins have been held, act as the users stake. The stake ensures that the user is actually committed to the overall health of the system.