WIKI

*Paid Advertisement. Not financial advice. RugDoc is not responsible for the projects showcased here. DYOR and ape safu.

What Is Proof of Work (PoW)?

Table of Contents

PoW describes a system for deterring frivolous or malicious usage of computing power, such as sending spam or launching denial-of-service attacks, by requiring a not-insignificant but the feasible amount of effort. By using the SHA-256 hashing algorithm, Hal Finney adapted the concept to secure digital currency in 2004.

After its introduction in 2009, Bitcoin became the first widely adopted application of Finney’s PoW idea (Finney was also the recipient of the very first bitcoin transaction). As with many other cryptocurrencies, proof of work enables secure, decentralized consensus.

Understanding Proof of Work #

The purpose of this explanation is to describe how proof of work works in the bitcoin network. Unlike traditional currencies, bitcoins are backed by a distributed ledger known as a “blockchain.” This ledger contains information about all bitcoin transactions, arranged in sequential “blocks,” so that no users can spend the same bitcoin twice. As a result, the ledger is public, or “distributed”; an altered version would quickly be rejected by other users.

A hash, a long string of numbers, is how users detect tampering in practice. If you run a given set of data through a hash function (bitcoin uses SHA-256), only one hash will be produced. Because of the “avalanche effect,” however, even the smallest change to the original data results in an unrecognizable hash. In any case, the hash generated by a given function will have the same length no matter how large the original data set is. It can only be used to verify that the generated hash matches the original data. Since it is a one-way function, it cannot be used to obtain the original data.

For a computer to generate a valid hash for a set of bitcoin transactions, it needs to set a certain level of “difficulty.” This is set so that a new block is added to the blockchain approximately every 10 minutes. Setting difficulty involves selecting a “target” for the hash: the smaller the target, the smaller the set of valid hashes, and the harder it is to create one. This refers to a hash that begins with a very long string of zeros.

References:

Proof of Work (PoW). (2021, July 22). Investopedia. https://www.investopedia.com/terms/p/proof-work.asp

Wikipedia contributors. (2021, December 29). Bitcoin. Wikipedia. https://en.wikipedia.org/wiki/Bitcoin#:%7E:text=The%20cryptocurrency%20was%20invented%20in,a%20process%20known%20as%20mining.

Updated on January 22, 2022
How do you feel about this article?
 

Leave a Reply

*Paid Advertisement. Not financial advice. RugDoc is not responsible for the projects showcased here. DYOR and ape safu.

Official Partners

BNBchain856
bubblemapsrdbig
Popular Links
Resources
For Farm Owners
RugDoc

Disclaimer: This is done with our best knowledge and effort, nothing can be known for certain – always DYOR and risk management. This is NOT financial advice. Use the information presented here to inform your own decisions. Referral links may be included on any outbound link.

  • What do the risk ratings mean?

Our mission here at RugDoc is to screen for hard rug code that results in 100% theft of ALL underlying funds for ALL participants.

This is the ONE part of the due diligence process that most people cannot simply do on their own as it costs thousands of dollars to hire a senior solidity developer to look over a farm for safety.

A project coin with terrible code can go up in price, and a project with good code and a good team can also go down in price.

Do NOT use our ratings to refer to your likelihood in making money if you invest in the project. They are ONLY in reference to code safety.

Everything else beyond code safety is YOUR responsibility to go do research on. We just make sure the casino you’re betting in won’t rob you before you even get to place a bet.

Our reviews for projects are organized into a few colors.

🟢 Least Risk
These projects are the least likely to hard or soft rug. Usually reserved for cornerstone projects of an ecosystem where it makes no financial sense for them to rug in any manner as they make more money just being legit.

🔵 Low Risk
These projects are usually established projects in an ecosystem that have a track record of success or have KYC’d to us or other authoritative sources in the real world. As a result, it is extremely unlikely for them to soft rug or hard rug their projects. The projects can still fail and the token price can go down, but usually more as a result of natural market forces.

⚪️ Some Risk
This is the default rating for projects with unknown teams but have code that is unlikely to have hard rug risk. Since the team is unknown and doesn’t have a track record of success, it’s entirely possible that they may try to soft rug by dumping tokens, abandoning the project, etc. Even a last minute contract swap to a malicious contract is possible. The only thing that is unlikely is a complete hard rug as long as you are 100% sure you deposit into the contract we review.

🟠 Medium Risk
Similar to Some Risk, but the underlying code itself is custom enough or complex enough that it warrants an elevated risk rating that needs deeper research. Make sure you read every point presented to make sure you’re comfortable with that before entering. Still unlikely to hard rug, but more chances of custom code behaving incorrectly and causing other issues.

🔴 High Risk
Project contains code or practices that are HIGHLY LIKELY to lead to catastrophic losses as they are right now. Make sure you read the description carefully as we will always warn what these issues are. If you see the words Hard Rug anywhere in the review, STAY FAR AWAY!

⚫️ Not Eligible
We reserve the right to not review exceedingly complex projects that would require tens of thousands of dollars of senior security analyst man hours. Typically these are projects that deal with leverage, lending, options, derivatives, and anything that is overly complex and which requires tons of peer reviews and audits from top audit companies.

Search

  • How can I request for an update to my review?

🟢 For owners who have made impactful changes and would like an update to their farm review:

1️⃣ Use #update at @RugDocChat with your description and proof of changes and it will be forwarded to our scanners.

2️⃣ This does not guarantee a change in your review.

3️⃣ Owners who have difficulty solving the issues can consider our Consultation Package - please contact @BaymaxCrypto on Telegram to discuss.