What is Proof of Work (POW) ?

What is Proof of Work (POW) ?

What is Proof-of-Work (PoW)?

Proof-of-Work (PoW) is a consensus algorithm used to maintain agreement and validation on a blockchain network and was developed to solve the issue of double-spending through the function of digital signatures to indicate coin usage at certain periods of time.

Proof-of-Work’s initial concept was developed in 1993 by Cynthia Dwork and Moni Naor to prevent server overload attacks or Denial-of-Service Attacks (DoS). Afterwards, in 2009, Bitcoin’s blockchain network was born with the simultaneous use of the Proof-of-Work mechanism used in accomplishing network consensus.

How does Proof-of-Work function?

Proof-of-Work is a mechanism relying on heavy usage of electricity when validating transactions. The immense costs in electricity derives from the need of high-functioning hardware required in solving complex mathematical problems. Each equation is different for each blockchain network. Before adding a new block to the chain, the transaction contents within it would need to be validated (Mined) by miners beforehand.

In the process of mining, or solving mathematical equations, a large number of decentralized miners would be involved and the difficulty in finding the randomized nonce function would also be adjusted to fit the certain situation at hand. Note that despite any difficulty level, Bitcoin’s blockchain generates a new block every 10 minutes, functions tend to vary for different networks. However, with more miners comes a higher difficulty level and the opposite for less miners to fit the proportion of the 10-minute block-adding period.

Moreover, hash functions are also involved, which is the encryption of data and information within blocks that reverts to other forms of jumbled letters and numbers when changed or adjusted. Hashes are used for confirming and connecting blocks to one another as it represents identically-shared information between blocks and can be used to track a network’s validity. Bitcoin uses the SHA-256 function encryption method, while Ethereum uses Ehash, both of which are main components of a blockchain network’s immutability.

In the competition for block validation, those who succeed in finding the nonce function first would be pooled with other miners for validation consensus, before receiving block mining rewards.

On the premise of pools, mining pools can be created through collaborative effort of numerous miners to increase their chances of randomizing for the nonce function faster. In this case, the mining rewards would be split amongst the miners.

Issues of Proof of Work

1. Electricity consumption

With its need for electric power, Proof-of-Work requires immense costs in electricity usage, with inevitably damages the environment.

2. Centralization

Mining pools for enhanced mining power can create a sense of centralization in the network, eliminating the cause of blockchain networks; decentralization.

3. 51% Attacks

Centralization can lead to 51% attacks or the event where over 50% of a network is overpowered by dishonest users, making them able to manipulate the consensus algorithm and potentially affecting the network and its coin/token value permanently.


Investopedia, wikipedia, Binance Academy, coindesk, efinancethai


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