An examination of proof-of-work and how it solves the mass coordination problem-7.7

Bitcoin itself is a marvel of modern engineering. As technology typically evolves, we are much farther ahead in our development of Bitcoin and other blockchain technologies than we are with our fundamental understanding of them. This post is an attempt to understand the underlying machinations that allow Bitcoin to be the tour de force that it is. I see the proof-of-work mechanism as the most significant contributor to this reality, but the question of why is a little more complicated. Let’s start with the basics.

The purpose of the proof-of-work algorithm in the context of Bitcoin is to solve the coordination problem in processing transactions. A somewhat applicable analogy is the Git versioning system. How do you create a system where many people can edit the same data and end up with the same copy of said data when all is said and done? Git solves the minutiae of this problem literally, by allowing all of its participants to push and pull data from a repository, and automatically adjusting only the specific lines of code that were edited from each person’s edits. A system like this would never work with a distributed money, however. With money, you have to deal with the fact that everyone wants to steal it. It would be like if people were rewarded for the number of git commits they successfully pushed through with no regard to quality. Sure everyone could edit it and maintain changes across versions, but at the end of the day your code base would be absolutely useless. This gets at what proof-of-work is designed to solve; how to create a standalone mass coordination network without the crutch of authority.

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