What is Proof-of-Work?

What is Proof-of-Work?

With the rise of cryptocurrencies in 2021, the Bitcoin network is going strong. As more people and institutions adopt Bitcoin, and decentralized applications continue to make their way to the public, more and more people will also follow the same paths. 

With the rise of cryptocurrency in 2021, Bitcoin’s legacy will only grow stronger. As institutions continue to invest in Bitcoin and decentralized applications enter public hands, more proponents claim that much of the hash rate comes from renewable energy sources or stranded energy. More people want to know how these new technologies work. Finally, when a curious cryptocurrency user comes across mining, they will likely come across the terms Proof-of-Work (PoW) and Proof-of-Stake (PoS). Let’s see how this consensus mechanism came about to get a better picture of cryptocurrencies.

A Brief History of Proof-of-Work

Proof of Work has its roots in email technology. Spam messages were rife in the early 1990s, and during that time, an article by two academics, Cynthia Dwork and Moni Naor, was published on how to stop these spam messages. Cryptography for blockchains was used in documents as early as 1992. However, it was not until 2004 that actual work was done by developing tokens that allowed users to validate each ticket against a legitimate server constantly. Stimulated by the 2008 financial crisis, Satoshi Nakamoto, the anonymous founder of Bitcoin, used various technologies to create the consensus mechanism we know today in crypto as Proof-of-Work.

Today, Proof-of-Work has been implemented in networks like Bitcoin, Litecoin, Ethereum, and Dogecoin. It is still considered the most secure and proven consensus algorithm today. However, newer protocols for decentralized applications are experimenting with alternative consensus mechanisms such as Proof-of-Stake (PoS), Delegated Proof-of-Stake (PDS), and other algorithms that require a fusion of Proof Use-of-Work and Proof-of-Stake.

What is Proof-of-Work?

Bitcoin and other networks work with a so-called Proof-of-Work (PoW) consensus mechanism. Consensus mechanisms allow an entire system to agree on the current state of the network and require the participation of both miners acting as a transaction. Validators, as well as individual nodes, enforce the consensus rules. It is essential that each node has the exact copy of the ledger and applies the same consensus rules to be “in consensus.” The network is incompatible if one computer node runs one version of Bitcoin while another runs a slightly different version of Bitcoin. Since Bitcoin and other blockchain protocols work by permanently recording each transaction in a digital ledger, there is an additional “consensus” on how the digital accounting features would make the functionality moot. In simple terms, for the blockchain to be valid, every computer must be “agreed.”

One of the critical factors of decentralization is not being subject to any central authority, so the laws governing any blockchain project adhere to math and code. The alternative is a centralized authority that dictates how a protocol is run. Disadvantages are, of course, entities that can abuse their power over a system. Therefore, consensus algorithms are one of the critical elements to achieving a functionally viable but low-trust system. As a security mechanism, PoW also uses power and processing power to protect the network from attacks.

PoW ensures that the digital ledger remains unchanged forever by using cryptography, hashes, and tricky puzzles. What makes a proof-of-work blockchain network so secure?

Proof-of-Work vs. Proof-of-Stake

Despite the mainstream media exaggerating the electrical power required to provide proof of work, mining Bitcoin still requires significant energy. Bitcoin consumes 0.5% of the world’s energy production, as much as a megacity like Las Vegas. However, its supporters claim that much of the hash rate comes from renewable or stranded energy sources. Another widespread criticism of Proof-of-Work coins claims that the consensus algorithm favors miners with more resources since those with plenty of cash can buy anything. Buildings are full of mining tools and mining crypto. Unlike Proof of Stake, the protocol’s ability to validate blocks is proportional to the amount of money it owes.

So there is a primary measure of resources: the amount of crypto you need to “test” or validate the network and the hardware requirements to “stake.” Instead of mining, Proof of Stake works in the validator. Nodes are operated by users who validate the network. However, Proof of Stake lends itself to other problems, such as breaking a blockchain. In PoS, if a group of people suddenly bands together to take over 51% of the network, and even a powerful individual buys more than half of the protocol share, the network is compromised.

Theoretically, this would be possible, but the implementation was not practical. However, due to these and other issues, some protocols in the future may choose to use a mix of proof-of-work ideas and proof-of-work. Of participation.


Proof-of-work, initially rooted in the early days of the internet, has become a word associated with cryptocurrency, possibly the idea’s most significant and enduring legacy. Although controversial, the environmental impact of PoW remains highly questionable, in contrast to the unprecedented security it offers to the Bitcoin network.

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