DLT, Why Proof of Work (works)
Consider that there are two mines; either mine can mine gold or silver. It costs the same amount of effort to mine gold as it costs to mine the exact value of silver. To mine either commodity, the mining company has to pay people in gold to work in the mines, provide equipment, etc. The yield on silver is much higher than that of gold. You can get ten units of silver for each unit of gold.
Both of the mines are always looking for a more efficient way to get ahead. One invents a bigger shovel, and then the other company plays catchup for a while. During this period, the inventor can produce more of the minerals and so becomes wealthier. Other mines also open as they see that there is a profit opportunity.
The mines are working as fast as possible to extract as much of the minerals that they can. As they mine deeper the amount, they can remove for a given amount of work decreases, to keep up with each other they poor in more resources. The good news for the miners is that the minerals buy more and more goods and services, so it is a profitable endeavor.
One day, a few of the mines decide that they can change the rules; they declare that silver is where it’s at and start to mine for silver exclusively. They put all their production capacity into mining silver.
There is an outcry from the people; why should we accept silver when we want gold? The people of the land start rejecting the silver. A few people try transacting in it, but everybody wants gold, so the relative value of the silver decreases. The mines producing silver have to work as hard but get less reward. Mining the silver rapidly falls below the rewards from mining gold; they have to put in the same resources. If they keep on this path, they will end up bankrupt.
What keeps them honest is the work function; it is not worth putting in work when the value of the work is less than the alternative.
In a Proof of Work system, the mines are, well, the miners. The people are the validating nodes. It isn’t the miners that get to decide but the people.
