Hi, Pros… Let us continue our discussion on how BTC or Alt-coins are generated to the Market.
We have seen that it is due to the Consensus mechanism by which Coins are generated.
Basically, the consensus mechanism was the validation of
transactions into the network. And coins are generated as a reward by network
Let us look into the first concept – Proof of Work
Currently, Blockchain Network uses this approach.
Here, the miner (Who validates the transaction in block)
shall find the random Nonce (Number only used once) which allows the block fit into the chain network.
In this process, for every successful nonce found by a miner,
the bitcoin network itself generates 12.5 BTC as a reward (25 BTC per block earlier). In this way for every successful mining, the Miner shall be given 12.5 BTC per block as a reward for his work.
This count will reduce for every 4 years. i.e. 25 BTC, 6.25
BTC, 3.125 BTC and it will be 0 BTC by 2140. So no more new BTC will be created from the year 2140.
This way the BTC are first awarded to Miners and they will subsequently sell to public and hence the same were circulated to market.
Requirements for POW –
A lot of CPU power. CPU’s, GPU’s or ASIC (Application
specific Integrated circuit) shall be used as Hardware
More Power (Electricity) is required for computers to
work (Finding Nonce)
More time it will take – Approx. 10 mins per block
Ultimately this approach has proven to be costly and time taking. The Other concepts (Proof of stake and Delegated Proof of stake) shall be discussed in later post.
