# <center><i class="fa fa-edit"></i> 2.4 Incentives and Proof of Work </center>
###### tags: `Blockchain`
The following notes are taken from [Coursera](https://www.coursera.org/learn/cryptocurrency/home/week/2)

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Assumptions of honesty is problematic
1. Block reward -> Only valid if block on long-term consensus chain
- Creator of block gets to:
- Include *special coin-creation transaction* in the block
- Choose recipient address of this transaction
2. Transaction Fee -> Voluntary, like a tip
- Creator of transaction can choose to make output value less than input value
- Remainder is transaction fee, goes to creator

### Proof of Work
To approximate selection a random node, select nodes in propotion to a resouce that **NO ONE CAN MONOPOLIZE**
- In proportion to computer power: proof-of-work
- In proportion to ownership: proof-of-stake

### Hash Puzzles
To create block, find nonce s.t.
`H(nonce || prev_hash || tx || ... || tx)` is very small



### Properties
1. Difficult to compute
- As of Aug 2014: ~ 10²⁰ hashes per block (target space = 1/10²⁰)
- Only some nodes bother to compete - miners
2. Parameterizable cost
- Nodes automatically re-calculate the target every 2 weeks
- *Goal*: **average** time between blocks = 10 min
- Prob(Alice wins next block) = fraction of global hash power she controls
- Key Security Assumption: Attacks infeasible if marjority of miners *weighted by hash power* follow the protocol
- For Individual Miners: `mean time to find block = 10 min / fraction of hash power`
3. Trivial to verify
- Nonce must be publish as part of block
- Other miners simply verify that `H(nonce || prev_hash || tx || ... || tx)` **<** `target`