A Brief History
In the late 1990s, a British cryptographer, Adam Back, invented the Hashcash proof of work system. You might not know what Hashcash is, yet you probably use it every day when sending emails. The hashcash algorithm requires a certain obscure mathematical puzzle to be solved by a computer. This puzzle might be extremely trivial compared to the vast amounts of computing power machines have today, but it still requires enough power, that compounding the task hundreds of time becomes computationally expensive. Solving this puzzle will generate something known as proof of work. This proof of work can be verified with relative speed and ease. Hashcash became a standard addition to Email software and providers. The hashcash proof of work stamp is added to the email header in order to prove that the computer did in fact use some computing power, and in essence paid to send the email. As the user you will not even notice the time spent by your computer to solve this puzzle, as it is under 1 second. However, for someone that wants to send 10 000 emails in order to spam a particular target group, this acts as a deterent, considering the amount of computing power they'd now need for fast bulk spam.
The utility of hashcash has been applied to various cryptocurrencies. A mining node will then need to complete the proof of work assigned by the protocol in order to attach the block to the blockchain. The computing power it requires to complete the proof of work helps to keep block solving within certain time intervals. As the network's combined computing power, or hash rate, increases, the algorithm is refactored to become more difficult in order to keep the block interval time the same. Proof of work also deters attackers from adding their own transactions to the blockchain, since they would need to invest heavily into computing power in order to gain a 51% majority over the network.
One of the concerns that many have however, is that as the proof of work algorithm gets more and more difficult, more users will opt not be miners in the network. They would need to purchase expensive computer hardware and pay large electricity bills in order to compete with others for the block reward. This starts to put the control of the network in a smaller group of mining pools who control large amounts of computing power. We'll discuss proposed alterantives to the proof of work algorithm in order to secure a cryptocurrency network.