Each member of the bitcoin network will generate its own address and private key. They can be compared to email addresses and their passwords: people can send bitcoin to your public address, and you have to use a private key to send bitcoin out of your bitcoin balance. Bitcoin addresses can also be presented in the form of QR codes.

When a transaction occurs, the sender broadcasts the transaction to other members (nodes) of the whole network. Other members will verify whether the sender has enough balance and whether the bitcoin involved in the transaction is repeatedly spent in other transactions. Once the transaction is confirmed by most nodes, it will be added to the large account book shared by users of the whole network, and all users will update the "account" balance of both sides of the transaction synchronously. For network nodes, it is very simple to verify the effectiveness of these transactions. Therefore, it is not safe to use one person one vote method to verify transactions. Hackers can arrange a large number of false nodes to verify false transactions.

Therefore, bitcoin adopts the proof of work (POW) mechanism to solve the security and double cost problems without relying on a third party. In essence, workload proof is to let network members compete to solve the mathematical problems that are difficult to solve but easy to verify. In about 10 minutes, the verified bitcoin transactions will be packaged into a block by the node, and a node will add the block to the bitcoin general ledger, that is, the bitcoin blockchain.

In order to obtain the right to add blocks, nodes compete for the effective solution of workload proof. Once a node calculates the effective solution, it will immediately broadcast the solution to other network members, who can quickly verify whether the solution is effective. Once the validity of the block and workload proof submitted by the node is approved by most network nodes, the node will get a certain amount of bitcoin. The bitcoin issued by the system is called "block subsidy", which is the only way to increase the supply of bitcoin, just as mining is the only way to increase the supply of gold. For this reason, the process of obtaining new coins is called "mining". In addition to block subsidies, the node that first completes the workload proof will also obtain the transaction fees contained in the block. The sum of block subsidy and transaction fee is block reward.

At first glance, it seems to be a waste of computer computing power and power when nodes compete for workload proof. However, workload proof is crucial to the operation of bitcoin. So far, there is only one way to make digital goods have reliable and high production cost. It is because it takes electricity and computing power to produce new currency that bitcoin can become hard currency. Only when the workload proves that a large amount of computing power and power are consumed, can the nodes that expand the computing power have strong motivation not to pack invalid transactions in their own blocks. The cost of verifying the validity of transaction and workload proof is far less than the cost of solving workload proof. Therefore, if a node tries to mix invalid transaction in a block, it will almost certainly fail, and the cost of computing power spent in workload proof will never come back.

The workload proves that the cost of packing blocks is extremely high, while the cost of verifying the effectiveness of blocks is extremely low, which almost eliminates anyone's motivation to create invalid transactions. If someone tries to do this, it will only waste power and computing power, and will not be rewarded. Therefore, bitcoin can be understood as a technology: it converts electricity into real transaction records through the consumption of computing power. Nodes consume electricity in exchange for bitcoin rewards, so they have a strong incentive to maintain the integrity of bitcoin. Due to the economic incentives for honest nodes, bitcoin's ledger has never been flawed since its birth, and the double flower attack on confirmed transactions has never been successful. In fact, the integrity of bitcoin's books does not depend on the honesty of any party. Bitcoin relies entirely on verification and doesn't have to trust anyone.

As of January 2017, the total computing power of bitcoin network is about equal to the total computing power of 2 trillion consumer laptops, which is 2 million times greater than that of the world's largest supercomputer and 200000 times greater than that of the world's top 500 supercomputers. By monetizing computing power directly, bitcoin has become the largest single purpose computer network in the world. It's very impossible to attack the whole network of bitcoin. Even if we concentrate on big things and mobilize too many resources to do it, the only goal we can achieve is to destroy bitcoin and get 0. I'm afraid no one will do such a thing!

Whether bitcoin is a waste of electricity or not is fundamentally due to people's misunderstanding of the nature of value. Value is subjective rather than objective. Whether electricity has been wasted or not can only be judged by the people who consume it. Those who are willing to pay for the operation cost of the bitcoin network are actually making effective use of the electricity consumption, which means that the electricity is produced to meet the needs of consumers and is not wasted. Functionally speaking, POW is the only way to create digital hard currency invented so far. As long as people think it's worth it, it's not wasted.

(2021-4-7)