What is Proof of Work (PoW)?

Proof of work (PoW) refers to a system that demands a considerable amount of effort to discourage malicious uses of computing power, such as sending spam emails or launching denial of service attacks.

What is Proof of Work (PoW)?


What is Proof of Work in Blockchain?

PoW is a method of adding new blocks of transactions to the blockchain of a cryptocurrency. In this scenario, the work consists of creating a hash (a long string of characters) that matches the target hash for the current block. The crypto miner who does so gets the right to add that block to the blockchain and receive rewards.

Bitcoin was the first widely adopted application of Hal Finney's PoW concept after its release in 2009. Many other cryptocurrencies use proof of work to achieve secure, and decentralized consensus.

The word "work" is crucial in proof of work. To prevent anyone from gaming the system, the method requires miners to compete with one another to be the first to answer arbitrary mathematical puzzles. The winner is selected to add the newest batch of data or transactions to the blockchain. Winning miners receive their reward only when other network participants verify that the data being added to the chain is correct and valid.

How Does it Work

Users identify tampering using hashes, which are long strings of numbers that serve as proof of work. Put a particular set of data through a hash function, and it will only ever produce one hash. However, due to the "avalanche effect," even little changes to any piece of the original data will result in a completely incomprehensible hash.

The hash created by a given function will be the same length regardless of the size of the original data set. The hash is a one-way function that can only be used to verify that the data that created the hash matches the original data.

Since generating any hash for a set of bitcoin transactions would be too easy for modern computers, the bitcoin network sets a significant degree of "difficulty" in turning the process into "work". This parameter is set so that a new block is "mined" (added to the blockchain creating a valid hash) every 10 minutes.

Setting the difficulty is done by defining a "target" for the hash: the lower the target, the smaller the set of valid hashes and the more difficult it is to generate one. This results in a hash starting with a long line of zeros.

Proof of Work vs Proof of Stake

The first cryptocurrency consensus mechanism was proof of work. With the launch of Peercoin in 2012, an alternative, proof of stake, was introduced. It chooses transaction validators depending on the number of coins staked, or locked up, to the network.

Proof of stake is more scalable than proof of work since it does not require nearly as much processing power. Proof-of-stake cryptocurrencies are more ecologically friendly since they can execute transactions faster for lower fees and with less energy usage. It is also far easier to begin staking crypto than mining because no expensive hardware is necessary.

However, from a safety standpoint, proof of work is more proven. One potential concern with proof of stake is that parties with large holdings in cryptocurrencies may have too much power, which isn't an issue with proof of work.

Advantages and Disadvantages of Proof of Work

Proof of work may provide a higher level of security than other methods, with bitcoin currently operating for more than a decade without a significant outage or hack.

However, while proof of work provides ideal security and decentralization, it contains a significant problem: it consumes a significant amount of energy.

According to bitcoin fans, such wasted energy consumption is a justifiable price to pay for the one consensus mechanism that has truly proven robust at scale. For those who are still suspicious of cryptocurrency, this is practically an ecological disaster.

Biggest advantages:

  • Provides a decentralized way of transaction verification.
  • High level of security.
  • Miners can earn cryptocurrency rewards.

Biggest disadvantages:

  • High energy consumption.
  • Inefficient, with slow transaction speeds and substantial fees.
  • Mining necessitates the use of costly equipment.


Bottom line

Proof of work is the most popular of the two main consensus algorithms for validating blockchain transactions. While not without limitations, proof of work miners help ensure that only legal transactions are stored on the blockchain.

PoW was the preferred consensus mechanism for early cryptocurrencies that required a safe, decentralized method of processing transactions. Although proof of stake has recently evolved as a less energy-intensive alternative, many coins continue to employ proof of work.


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