# Proof of Work (PoW): What is it and How Does it Work?

All the Key Points...

Here we are going to explore the very popular consensus algorithm called proof of work in detail and also going to see why we need this.

This concept originally arose out of the field of cryptography and its applications in the development of digital currencies, but it has since come to play an important role in many facets of our everyday lives, from securing business transactions to protecting data online to allowing cryptocurrencies to become widely accepted as viable forms of payment.

Proof-of-work also referred to as PoW, refers to a piece of data that was created through a series of computational processes known as mining.

Mining requires a lot of computing power in order to solve algorithms (through brute force) and find an answer that will then be added onto a blockchain.

Once verified, new transactions are confirmed by adding them to existing blocks on the blockchain which then rewards miners with newly created coins or tokens.

## What is proof of Work?

Proof-of-work (PoW) represents a piece of data that was costly to produce so as to satisfy certain requirements.

You have to make a lot of guesses before finding a successful proof of work. Bitcoin uses Hashcash puzzles as PoW.

As a side effect, they are uniquely suited for use in cryptocurrencies or other distributed consensus systems.

This property is often referred to as crypto-independence. Miners compete to find an appropriate nonce value where solving them requires large amounts of computer resources thus creating the desired mathematical result.

One special characteristic about proofs-of-work distinguishes them from cryptographic hash functions.

if a single bit (or more generally n bits) changes in any input value then no amount of computation will yield an output value with a matching proof-of-work difficulty target because proofs were chosen to have short outputs.

Related Article: Chain Based Proof of Stake: Comprehensive Guide

## Why Proof of Work?

Proof-of-work (PoW) algorithms are by far the most popular type of consensus algorithm.

Bitcoin, Ethereum, Litecoin, and Zcash are all built on top of some variation of a PoW system.

These systems leverage tremendous amounts of computational power in order to maintain their blockchains.

Proof-of-work was originally invented as a solution to spam emails – spam is hard to stop because you can always build more computers to make sending thousands or millions of emails per second harder, but not impossible.

Related Article: Proof of Work and Proof of Stake: What is the Difference?

## How does it work?

Proof-of-work (PoW) is a requirement that a significant amount of computational work is performed in order to access a network resource, such as sending an email or creating a digital currency.

From Bitcoin to Cloudflare, Proof-of-Work has many applications across numerous industries.

At its core, PoW distributes trust by making expensive verification a competitive arms race, eliminating fraud and other forms of abuse.

Under PoW, miners are motivated to behave honestly for two reasons.

Firstly, they can earn transaction fees when they compete with each other to solve blocks.

Secondly, they have to secure their place in line otherwise, they may be replaced by another miner who finds a more efficient solution than theirs.

This economic incentive ensures that block solutions aren’t forged and fraudulent transactions aren’t included on ledgers even without central oversight or control.

Related Article: What Is Bitcoin? Technology, Use, Price, Demand, Legal

## What is Proof of Work Mining?

Proof-of-work mining is not based on solving an arbitrarily difficult problem, but rather spending a certain amount of energy to solve a specific mathematical problem (and in PoW’s most common implementation, producing a large number of valid hashes from that computation).

The result of such computations can be easily verified by other miners (or even by those who simply want to keep track of transactions) but are generally extremely difficult to reverse engineer.

In turn, finding a solution for any given hash takes quite some time; as long as no one finds said solution before you do, your block will make its way into every copy of the blockchain that gets updated over time.

These proofs are often compared to checking someone’s math homework the more work you do, proving yourself wrong over and over again along the way with increasingly complex equations until you finally hit upon a workable answer but much less time-consuming.

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## What is Bitcoin Mining?

Simply put, bitcoin mining is how new bitcoins are brought into circulation.

People engage in bitcoin mining when they connect their computers to a peer-to-peer network and solve certain mathematical problems.

These problems require brute computational force to solve but consume a negligible amount of energy for users with good hardware.

Bitcoin miners are paid transaction fees as well as a subsidy of newly created coins when they solve these problems using dedicated software on specialized hardware.

Related Article: Top 12 Best Mining Pools for Best Cryptocurrencies

## Satoshi Nakamoto and the Genesis Block

The proof-of-work system, along with Bitcoin’s peer-to-peer network, creates a situation where it’s not necessary to trust anyone in particular.

Instead, you can trust that cryptographic math will be used fairly (or at least fear a negative consequence if someone cheats).

Although any single malicious actor shouldn’t be able to compromise a system using PoW, they could still attack one part of an ecosystem through the use of 51% attacks.

Additionally, there’s always some level of risk that comes from trusting anonymous miners on hidden networks they may steal money or behave unethically for their own benefit.

But overall, proof-of-work cryptocurrencies offer more resistance against centralization than traditional systems like fiat currency or PayPal does.

In October 2008, Nakamoto released a paper explaining how Bitcoin would work. A month later, he uploaded his software to Github.

In January 2009, Nakamoto’s system made its first public appearance in The Cryptography Mailing list and then totally disappeared for another three years.

It wasn’t until 2011 that Bitcoin appeared again with a new block on January 3. This is known as The Genesis Block as it was mined before there were any other blocks on the blockchain.

## Benefits of Proof of Work

Before we dive into proof of work, let’s first take a look at some benefits that go along with using PoW-based blockchain systems.

The first big advantage is security, Because miners are constantly verifying transactions on blockchains, they act as guardians against cybercriminals who try to inject false information or alter records.

Another perk of PoW-based blockchain technologies is resistance to censorship. Because miners participate in running these networks, no single entity can influence their activity, even if that entity has substantial control over other parts of the blockchain.

This benefit becomes more evident when you compare proof of work to other methods for achieving consensus on distributed ledgers.

## Advantages of Proof of Work

The biggest advantage to proof-of-work algorithms is their security since there are no shortcuts.

Any attempt to change or fake a transaction on a blockchain would require redoing every single block in its history and thus all work that was ever accomplished on that chain.

That’s exponentially more difficult than modifying one transaction record, making proof-of-work schemes highly resistant to falsification.

Similarly, because miners compete with each other to complete blocks first, they have an incentive not only to continue working on them but also to be honest about what they find; otherwise, their discoveries will lose out.

## Disadvantages of Proof of Work

The main disadvantage of proof-of-work (PoW) systems like bitcoin are that they are not scalable.

That’s to say, at some point, you have to ask yourself whether your cryptocurrency or blockchain project actually needs a distributed ledger or if a centralized database could suffice.

For example, Bitcoin’s original chain data has already reached close to 150GB, which cannot be easily stored on most smartphones.

## Conclusion

Although PoW is used in a wide variety of cryptocurrency applications, some claim that its energy usage makes these cryptocurrencies unsustainable.

However, proponents of PoW argue that while they may not be ideal as a currency, they can still be used to facilitate secure transactions.

The future value and sustainability of any cryptocurrency hinge on how stakeholders address concerns about its environmental impact.

Related Article: Secure Proof of Stake (SPoS): Revolutionary Consensus