What is Proof-of-Work – PoW?

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What is proof of work? 

Proof-of-work is a consensus algorithm used by most blockchain networks in order to prevent double-spending. Double-spending occurs when someone is able to spend their cryptocurrency more than once, which would absolutely ruin the value of cryptocurrency.

Proof-of-work secures the network; this is done by people from all over the world that are called miners. Proof-of-work was first explained by Bitcoin’s founder Satoshi Nakamoto in 2008 in the original white paper. It allowed the creation of digital cash, similar to real money, that can only be spent once and therefore hold value.

Proof of Work POW Consensus Algorithm

Is Proof-of-work important?

Very important! There’s a lot to running a network that people from all over the world use to broadcast transactions. Those who help run this network and help validate these transactions are called ‘miners.’

Once miners validate a transaction is legit, it gets added to the blockchain, and the transaction is pushed through. Because the blockchain database is open, these miners can see whether funds have been spent before or not. It enables them to know if the sender actually had the funds they wanted to send elsewhere.

Because it’s open, and because miners keep track of all these transactions, they can also see where these funds came from. Because there are so many, there’s a lot of miners required to help validate the network throughout the world. Proof-of-work allows for this to be done through cryptography and mathematical algorithms, where new unique IDs are created to label transactions/blocks and add them to the blockchain. All are working with the same rules for validating transactions and creating new blocks.

How does PoW work? Why would someone want to do this?

So you now know that PoW is used to secure the network and prevent double-spending. Though, because there are so many transactions at the same time, transactions are bundled into a single block, rather than creating a block for every single transaction.

Miners use computational power to bundle these transactions and create a new block. This is done through hashing, where the input of data is the single transaction, and the output of data is the new block. This is a unique block, and while inputting data was easy, it’s pretty much impossible to revert this and try to tamper with the data in the block, as it’s added to the blockchain and referred to in every single new block. Meaning that if someone wanted to change the data in a block, they would need to hack every block processed on the blockchain afterward.

We won’t go too much into detail here; the summary is that computational power is used to generate a unique block that holds the input data.

Miners do this because they get rewarded for doing so. Miners ‘compete’ in order to be the first to resolve a puzzle to generate a new ID for the new block that’s to be added to the blockchain while also verifying the transactions.

The first transaction in a block is called the coinbase transaction. This is where the miner may reward himself by printing new Bitcoins (a fixed amount) and charge transaction fees. This reward is not fixed until other miners take up the block, so the block will have to meet all the rules. Miners will make blocks on the longest chain (most difficulty, not most blocks) because this chain is the safest. Since you have little chance of being the first to find a block each time, it’s smart to play by the rules here. You might put years of work into mining, and then if other miners do not accept your block, all your work has been for nothing.

To confidently launch a good attack on this network, you must be able to mine more blocks than the rest of the network combined in order to deceive honest miners. This is known as a 51% attack. Thanks to this feature, the network is safe, provided at least 50% of the hash power comes from honest players. Because there are currently so many miners powering, for example, the Bitcoin network, it’s become (almost) impossible to ever hack this.

What are the pros and disadvantages of Proof-of-Work (PoW)?


  • It has a proven track record and has been working for years
  • It’s a reliable system


  • It’s relatively slow for transactions to be approved.
  • It consumes a lot of energy
  • It’s very environmental unfriendly compared to other solutions

Examples of cryptocurrency that use PoW

  • Bitcoin (BTC)
  • Litecoin (LTC)
  • Monero (XMR)

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