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Proof of work – What it is and how does it work?

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In the blockchain industry we hear a lot about consensus algorithms, we debate about them and try to learn as much as possible. As you know, to reach consensus on the network Bitcoin is using proof of work (PoW). Ethereum is using it as well, but soon will replace it with proof of stake (PoS). Why would they do that? Well, there are a couple of reasons, PoS is more efficient than PoW could ever be. But, both of them have their pros and cons.

In this article, we will make an overview of proof of work consensus algorithm, its good and bad sides.

One project you can immediately start working on Waves Platform

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A lot of talks has been brought up about cryptocurrencies. It is mainly the price that has been the highlight. The crypto markets are a highly speculative market with a lot of price being pumped and dumped based on future predictions of the price. Add regular mortals to the story which can now be in possession cryptocurrency with a swipe of a credit card and you are set for a perfect storm in capital markets which hasn’t been seen up until now.

But there is more to the story than just the price, and this is what I hope people will realize once they enter in the crypto domain through this one vertical which is currently the $ counter value. The underlying machinery powering this new revolution in the digital domain is something that I believe will truly change how we perceive trust, ownership, and value. Some of the hardcore veterans of Internet and computing like Marc Andreessen have even gone so far to say that it is as big of an invention as the Internet. The Blockchain.

Stage of decentralized exchanges

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As we all know, centralized exchanges are very risky. The history showed us, more than once, the potential risk which stems from many hacks happening over the last few years. Do you remember Mt. Gox hack? Or Bitfinex? Or maybe Bitstamp? Yea, many hacks happened, and many will continue to happen.

The whole idea behind blockchain is to avoid centralization and to introduce decentralization via technology. And then, we trade those decentralized assets in a centralized place? That doesn’t make any sense and isn’t logical. It is so wrong to save decentralized assets on a centralized place during such a crucial process as trading.

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