What Is Proof of Work (PoW)?
Proof of work (PoW) describes a system that requires a not-insignificant but feasible amount of effort in order to deter frivolous or malicious uses of computing power, such as sending spam emails or launching denial of service attacks. The concept was subsequently adapted to securing digital money by Hal Finney in 2004 through the idea of "reusable proof of work" using the SHA-256 hashing algorithm.
Following its introduction in 2009, Bitcoin became the first widely adopted application of Finney's PoW idea (Finney was also the recipient of the first bitcoin transaction). Proof of work forms the basis of many other cryptocurrencies as well, allowing for secure, decentralized consensus.
Key Takeaways
- Proof of work (PoW) is a decentralized consensus mechanism that requires members of a network to expend effort solving an arbitrary mathematical puzzle to prevent anybody from gaming the system.
- Proof of work is used widely in cryptocurrency mining, for validating transactions and mining new tokens.
- Due to proof of work, Bitcoin and other cryptocurrency transactions can be processed peer-to-peer in a secure manner without the need for a trusted third party.
- Proof of work at scale requires huge amounts of energy, which only increases as more miners join the network.
- Proof of Stake (POS) was one of several novel consensus mechanisms created as an alternative to proof of work.
Understanding Proof of Work
This explanation will focus on proof of work as it functions in the bitcoin network. Bitcoin is a digital currency that is underpinned by a kind of distributed ledger known as a "blockchain." This ledger contains a record of all bitcoin transactions, arranged in sequential "blocks," so that no user is allowed to spend any of their holdings twice. In order to prevent tampering, the ledger is public, or "distributed"; an altered version would quickly be rejected by other users.
Theway that users detect tampering in practice is through hashes, long strings of numbers that serve as proof of work. Put a given set of data through a hash function (bitcoin uses SHA-256), and itwill only ever generate one hash. Due to the "avalanche effect," however, even a tiny change to any portion of the original data will result in a totally unrecognizable hash. Whatever the size of the original data set, the hash generated by a given functionwill be the same length. The hash is a one-way function: it cannot be used to obtain the original data, only to check that the data that generated the hash matches the original data.
Generating just any hash for a set of bitcoin transactions would be trivial for a modern computer, so in order to turn the process into "work," the bitcoin network sets a certain level of "difficulty." This setting is adjusted so that a new block is "mined"—added to the blockchainby generating a valid hash—approximatelyevery 10 minutes. Setting difficulty is accomplished by establishing a "target" for the hash: the lower the target, the smaller the set of valid hashes, and the harder it is to generate one. In practice, this means a hash that starts with a very long string of zeros.
Proof of work was initially created as a proposed solution to the growing problem of spam email.
Special Considerations
Since a given set of data can only generate one hash, how do miners make sure they generate a hash below the target? They alter the input by adding an integer, called a nonce ("number used once"). Once a valid hash is found, it is broadcast to the network, and the block is added to the blockchain.
Mining is a competitive process, but it is more of a lottery than a race. On average, someone will generate acceptable proof of work every ten minutes, but who it will be is anyone's guess. Miners pool together to increase their chances of mining blocks, which generates transaction fees and, for a limited time, a reward of newly-created bitcoins.
Proof of work makes it extremely difficult to alter any aspect of the blockchain, since such an alteration would require re-mining all subsequent blocks. It also makes it difficult for a user or pool of users to monopolize the network's computing power, since the machinery and power required to complete the hash functions are expensive.
If part of a mining network begins accepting an alternative proof of work, it is known as a hard fork.
Example of Proof of Work
Proof of work requires a computer to randomly engage in hashing functions until it arrives at an output with the correct minimum amount of leading zeroes. For example, the hash forblock #660000, mined on Dec. 4, 2020 is00000000000000000008eddcaf078f12c69a439dde30dbb5aac3d9d94e9c18f6. The block reward for that successful hash was 6.25 BTC.
That block will always contain 745 transactions involving just over 1,666 bitcoins, as well as the header of the previous block. If somebody tried to change a transaction amount by even 0.000001 bitcoin, the resultant hash would be unrecognizable, and the network would reject the fraud attempt.
Proof of Work FAQs
What Does Proof of Work Mean?
PoW requires nodes on a network to provide evidence that they have expended computational power (i.e. work) in order to achieve consensus in a decentralized manner and to prevent bad actors from overtaking the network.
How Does Proof of Work Validate a Crypto Transaction?
The work itself is arbitrary. For Bitcoin, it involves iterations of SHA-256 hashing algorithms. The "winner" of a round of hashing, however, aggregates and records transactions from the mempool into the next block. Because the "winner" is randomly-chosen proportional to the work done, it incentivizes everybody on the network to act honestly and record only true transactions.
Why Do Cryptocurrencies Need Proof of Work?
Because they are decentralized and peer-to-peer by design, blockchains such as cryptocurrency networks require some way of achieving both consensus and security. Proof of work is one such method that makes it too resource-intensive to try to overtake the network. Other proof mechanisms also exist that are less resource-intensive, but which have other drawbacks or flaws, such as proof of stake (PoS) and proof of burn. Without a proof mechanism, the network and the data stored within it would be vulnerable to attack or theft.
Does Bitcoin Use Proof of Work?
Yes. It uses a PoW algorithm based on the SHA-256 hashing function in order to validate and confirm transactions as well as to issue new bitcoins into circulation.
How Does Proof of Stake (PoS) Differ from PoW?
PoS is a consensus mechanism that randomly assigns the node that will mine or validate block transactions according to how many coins that node holds. The more tokens held in a wallet, the more mining power is effectively granted to it. While PoS is far less resource-intensive, it has several other flaws including a greater chance of a 51% attack in smaller altcoins and incentives to hoard tokens and not use them.
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FAQs
Proof-of-work (PoW) is a blockchain consensus mechanism that incentivizes network validation by rewarding miners for adding computational power and difficulty to the network. It is a lottery system where miners increase their likelihood of receiving the reward the more power they add.
What is PoW proof-of-work in blockchain? ›
Proof of work (PoW) is a decentralized consensus mechanism that requires network members to expend effort in solving an encrypted hexadecimal number. Proof of work is also called mining, in reference to receiving a reward for work done.
What is proof of proof in blockchain? ›
ADVERTIsem*nT. Proof of Work(PoW) is the original consensus algorithm in a blockchain network. The algorithm is used to confirm the transaction and creates a new block to the chain. In this algorithm, minors (a group of people) compete against each other to complete the transaction on the network.
What is an example of proof-of-work PoW? ›
Proof of work (PoW) is a technology that supports cryptocurrencies by preventing users from carrying out fraudulent transactions. Examples of popular proof-of-work cryptocurrencies include Bitcoin, Litecoin and Dogecoin.
What is proof-of-work and proof of stake in blockchain? ›
What Is Proof-of-Stake vs. Proof-of-Work? Proof-of-Stake (POS) uses randomly selected validators to confirm transactions and create new blocks. Proof-of-Work (POW) uses a competitive validation method to confirm transactions and add new blocks to the blockchain.
What is PoW in private blockchain? ›
Proof of Work (PoW) in the blockchain is a consensus mechanism that lets miners add a new block to the network based on the computation done to find the perfect hash. Network participants validate transactions added by the new block.
What are the advantages of PoW in blockchain? ›
Advantages and disadvantages of proof of work
| Pros | Cons |
|---|
| High level of security. | Inefficient with slow transaction speeds and expensive fees. |
| Provides a decentralized method of verifying transactions. | High energy usage. |
| Allows miners to earn crypto rewards. | Mining often requires expensive equipment. |
Proof of work is a consensus mechanism used to confirm that network participants, called miners, calculate valid alphanumeric codes — called hashes — to verify bitcoin transactions and add the next block to the blockchain.
What are the different proof of work blockchain? ›
Examples of current industry-leading PoS blockchains include Polkadot, Avalanche, and Cardano. Ethereum, which was originally designed as a PoW blockchain, is in the process of transitioning to a PoS blockchain called Ethereum 2.0. Instead of miners validating transactions, PoS blockchains simply have validators.
How does PoW algorithm work? ›
How does the PoW algorithm work? The Proof-of-Work (PoW) consensus algorithm works by requiring each miner to overcome a difficulty level to prove the validity of a block. A block is marked as “valid” only if the hash value of the entire block is lower than the difficulty hash.
The main difference between proof of work and proof of stake is that proof of stake relies on crypto staking, while proof of work relies on crypto mining. These methods add new "blocks" of transactions to the historical record, and both provide a way for users to earn additional crypto.
Why is proof of work called proof of work? ›
The reason it's called “proof of work” is because the network requires a huge amount of processing power. Proof-of-work blockchains are secured and verified by virtual miners around the world racing to be the first to solve a math puzzle.
What is the strength of proof of work? ›
Proof of work pros and cons
| Pros | Cons |
|---|
| Operating costs make it highly secure Network is more open and decentralized Only consensus mechanism to have been proven at scale | Requires the use of increasing amounts of electricity Generates a considerable amount of e-waste Slower and less scalable than proof of stake |
Nov 21, 2022
The primary advantage of PoW is its high level of security. The computational power required to solve the puzzles makes launching a 51% attack on the network extremely difficult. However, the downside is that it requires a significant amount of energy consumption, making it environmentally unfriendly.
What is the difference between PoB and PoW? ›
In comparison to the proof of Work (PoW) system, PoB reduces energy consumption. Moreover, compared with proof of stake (PoS) systems, PoB doesn't need miners to stake coins to add a new block to the network.
Is Ethereum a PoS or PoW? ›
The Ethereum Merge is a network update to transition Ethereum from proof of work (PoW) to a proof-of-stake (PoS) consensus mechanism.
Which blockchains are PoW? ›
- Bitcoin.
- Optimism.
- Dogecoin.
- Litecoin.
- Solana.
- Pepe.
- Ethereum.
- XRP.
Proof of work is a technique used by cryptocurrencies to verify the accuracy of new transactions that are added to a blockchain. The decentralized networks used by cryptocurrencies and other defi applications lack any central governing authority, so they employ proof of work to ensure the integrity of new data.
What is the largest PoW blockchain? ›
DOGE is officially the second largest PoW blockchain after Bitcoin.
What is the greatest benefit of PoS over PoW? ›
PoS is more energy efficient compared to PoW. The cost of participating relies on the economic cost of staking coins and not on the computational cost of solving puzzles. This decreases the energy required to run the consensus mechanism and creates a more eco-friendly system.
PoW deters attackers by imposing significant hardware and energy costs. Conversely, PoS' deterrence stems from the network's value, meaning PoS can secure a network with a fraction of the energy that PoW uses. The reason energy is such an important factor in scalability traces back to blockchain security.
What is PoW and PoS advantages and disadvantages? ›
PoW has shown to be a reliable way to secure the Bitcoin network, but PoS has advantages in terms of energy efficiency, scalability, and decentralization. PoS is also better for the environment because it doesn't need as much computing power as PoW.
Why is proof-of-work hard? ›
Proof-of-work makes double-spending incredibly difficult because changing any part of the blockchain would involve re-mining all subsequent blocks. Because the machinery and power necessary to execute the hash functions are expensive, it makes it impossible for users to monopolize the network's processing capacity.
Is proof-of-work better? ›
Security. So far, proof-of-work has been the most proven way to maintain consensus and security within a distributed public network. This is because proof-of-work requires the initial cost of hardware and the ongoing expenditure of resources, rather than a single upfront expense to participate like proof-of-stake.
Is proof-of-work fair? ›
Proof-of-Work's Fairness
Proof-of-Work is random and fair due to the strong randomness of the SHA-256 hash function which underlies the Proof-of-Work mechanism. There are no complex governance algorithms controlling which miners find blocks or decide the rules.
What is the disadvantage of proof work in blockchain? ›
The biggest disadvantage of proof-of-work centers on the computational capabilities needed to solve mathematical problems in authenticating blockchain transactions.
Which crypto currency is not based on proof-of-work? ›
The XRP Ledger uses a consensus mechanism called the XRP Ledger Consensus Protocol, which doesn't use proof-of-work or proof-of-stake for consensus and validation.
Is ethereum a proof-of-work blockchain? ›
The Ethereum network began by using a consensus mechanism that involved Proof-of-work (PoW). This allowed the nodes of the Ethereum network to agree on the state of all information recorded on the Ethereum blockchain and prevented certain kinds of economic attacks.
How is PoW secure? ›
This process is called “mining,” the solvers are called “miners,” and their collective efforts is what keeps the POW blockchain secure. Computational work is easy to do, easy to permanently record, and easy to verify. This is probably why Bitcoin's network has survived for well over a decade.
What are the best PoW algorithms? ›
Today's Top 7 Mineable PoW Algorithms Include Kadena, Scrypt, Cuckatoo32, Blake2B-Sia, X11, Equihash, and SHA256.
pow() is an built-in method in Java Math class and is used to calculate the power of a given number. The power of a number refers to how many times to multiply the number with itself.
What is one disadvantage of proof-of-work? ›
Need for more mining power
Unfortunately, that methodical pacing results in a waste of resources and a very high level of energy consumption. Because proof-of-work mining requires so much computing power, it tends to consolidate miners down to the few people who can afford the equipment.
Why proof-of-work is better than PoS? ›
PoW deters attackers by imposing significant hardware and energy costs. Conversely, PoS' deterrence stems from the network's value, meaning PoS can secure a network with a fraction of the energy that PoW uses. The reason energy is such an important factor in scalability traces back to blockchain security.
How is proof-of-work more secure? ›
Proof-of-Work prevents attacks by making miners expend resources to compete against each other to more quickly solve cryptographic equations to confirm each blockchain block. It relies on miners to act in good faith and follow consensus rules. One significant threat in Proof-of-Work networks is a majority attack.
Which is better PoS or PoW? ›
PoW involves competing to solve a complex mathematical problem to get the chance to verify the block while PoS works on the principle of staking. Due to the difference in principles – PoW uses a lot more energy to do verify one block, while PoS is able to do that same function at a tiny fraction of what PoW uses.
What is the objective of proof-of-work? ›
Proof-of-work (PoW) is a blockchain consensus mechanism that incentivizes network validation by rewarding miners for adding computational power and difficulty to the network. It is a lottery system where miners increase their likelihood of receiving the reward the more power they add.
Is Dogecoin proof-of-work? ›
The Dogecoin blockchain uses a proof of work consensus mechanism, where miners use computers to solve complex mathematical equations in order to process transactions and record them on the blockchain.
Does proof-of-work use a lot of energy? ›
Proof-of-work energy usage
The large energy usage associated with proof-of-work mining is an inevitable consequence of the fundamental nature of its algorithms. Ethereum moved to a far less energy intensive proof-of-stake consensus mechanism, reducing that network's electrical usage by over 99.9 percent.
Does proof-of-work get harder? ›
Some cryptocurrencies have no limit on how many new coins can be mined. Others, like Bitcoin, have a fixed amount of total possible coins. As more miners compete to unlock new blocks, proof-of-work problems become more difficult. Thus, the average time it takes the miners to find the right combination remains constant.
What is the full meaning of POW? ›
abbreviation for prisoner of war : He was a POW during the Vietnam war. a POW camp. SMART Vocabulary: related words and phrases.
Prisoners of War (POWs) are combatants captured and held by the enemy during periods of open conflict. During the American Revolution, thousands of soldiers, militiamen, and civilians were taken prisoner and their presence strained the resources of the British and Continental forces alike.
What are the advantages of proof of capacity? ›
Proof of capacity (PoC) authentication systems employ spare space on a device's hard drive to store solutions to a cryptocurrency hashing problem. The main benefit of a PoC system is its efficiency compared to proof-of-work (PoW) and proof-of-stake (PoS) systems.
How does proof of authority work? ›
Proof of authority (PoA) is an algorithm used with blockchains that delivers comparatively fast transactions through a consensus mechanism based on identity as a stake. The most notable platforms using PoA are VeChain, Bitgert, Palm Network and Xodex.
What does pob mean in order? ›
Definitions of POB. a numbered compartment in a post office where mail is put to be called for. synonyms: PO Box, Post-Office box, call box, letter box.
What is the difference between PoW and PoS and PoC? ›
Unlike Proof of Work (PoW) which uses separate mining hardware for computing power, or Proof of stake (PoS), which stakes miners' coins. PoC allows network participants (nodes) to use their available hard drives space for mining a new block and validating transactions.
What is proof of stake and proof? ›
Proof of stake is a consensus mechanism used to verify new cryptocurrency transactions. Since blockchains lack any centralized governing authorities, proof of stake is a method to guarantee that data saved on the network is valid.
Is BTC a PoS or POW? ›
Bitcoin does not and will not use Proof-of-Stake.
