Bitcoin: Why Proof of Work is crucial for security

The “work” paradigm makes fraud highly unlikely.

By Rick Betancur / July 17, 2022

Work in the form of energy is the metric used to validate transactions on Bitcoin’s blockchain. Miners use lots of energy (electricity to run expensive mining computer “rigs”) to guess the hash number corresponding to a 10-minute block of transactions. When a miner guesses that hash the transactions in that block are immortalized on the blockchain and the miner earns Bitcoin rewards and fees.

“Double spending” is the original problem Proof of Work (POW) intended to solve; you can’t spend your money twice. Rather to spend your money twice, or commit any fraud on Bitcoin’s blockchain, you would have to have the resources not only to re-mine a hash number on a block, but any subsequent block since each successive hash is based on the previous one.

Twelve years ago, this past week Satoshi Nakamoto, the mysterious creator of Bitcoin, noted the difficulty of gaming the system:

”This is a common point of confusion. There’s no such thing as being 1% towards solving a block. You don’t make progress towards solving it. After working on it for 24 hours, your chances of solving it are equal to what your chances were at the start or at any moment. It’s like trying to flip 37 coins at once and have them all come up heads. Each time you try, your chances of success are the same.”

This belies a common misconception that the work generated in POW is “solving” a computational problem. In essence each miner is guessing the hash number, similar to someone buying a lottery ticket. The difficulty of the work is meant to keep the block validations at 10-minute intervals and fluctuates with the amount of miners guessing. More miners = more work and vice versa.

Since the blockchain is publicly stored on distributed “nodes” worldwide, an attacker would need to overwhelm the network of nodes in what’s called a 51% attack, they would need to alter the data on over half of those nodes. Let’s do the math:

Bitcoin’s current hashrate (hash “guessing” by all miners) is at 193,000,000 TH/s. A typical mining “rig” computer like the Bitmain S19XP Hyd, which costs almost $20k, has a hash rate of 255 TH/s. An attacker would need to generate 51% of those hash rates, utilizing 386,000 rigs at a cost of about $7.6 billion in hardware.

This is not including infrastructure, storage, maintenance staff, and most importantly electricity which would easily cost millions per hour. Keep in mind we are talking about a single 10-minute block, if the attackers were not able to overwhelm the network in that time frame, they would have to also overwhelm each successive block.

These 51% attacks may be more feasible in smaller cryptos, for example Bitcoin SV, a controversial fork of Bitcoin, was repeatedly attacked last year due to its small size, orders of magnitude smaller than Bitcoin, further strengthening Bitcoin’s security as the largest crypto by market cap ever created.

Vestly Takeaway: POW remains the most secure method of validating transactions. Certainly, there is concern over the energy use for POW, but a recent peer-review white paper noted that Bitcoin was 56 times more energy efficient than the current banking system or put another way the banking paradigm uses 56 times more energy than Bitcoin. Bitcoin’s energy use is also rapidly decreasing with an ever-increasing reliance on green energy.