Beginners Guide

Proof of Work (POW)- What it is & How it Works

Author: Qadir AK

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Qadir Ak is the founder of Coinpedia. He has over a decade of experience writing about technology and has been covering the blockchain and cryptocurrency space since 2010. He has also interviewed a few prominent experts within the cryptocurrency space.

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A consensus algorithm is, in general, the decision-making process within a group. The algorithms for the blockchain consensus work with identical logic. Furthermore, the blockchain consensus algorithms have clear goals to expand the use of blockchain networks 

There are various types of consensus algorithms, based on the blockchain networks. But the two main ones are Proof-of-Work (PoW) and Proof-of-Stake (PoS).

This episode of Hard Fork Basics is going to take a look at one of the blockchain‘s most defining characteristics, its consensus mechanism, specifically Proof-of-Work (PoW). By the end you should hopefully be able to prove you know what it’s all about.

In this article, we will provide you with the complete guide on the popular consensus algorithm, Proof-of-Work (PoW). Let us look in detail in this review now.

What is Proof of Work?

Proof-of-Work is also commonly abbreviated as PoW. Proof-of-Work (PoW) is the oldest method of consensus. The idea for Proof of Work(PoW) was first published in 1993 by Cynthia Dwork and Moni Naor and was later applied by Satoshi Nakamoto in the Bitcoin paper in 2008.

Proof of Work consensus is the mechanism of choice for the majority of cryptocurrencies currently in circulation. The term “proof of work” was first used by Markus Jakobsson and Ari Juels in a publication in 1999.

It is essentially a network that prevents double-spending, and the big cryptocurrencies use it as the consensus algorithm.

A PoW algorithm works in such a way that nodes within a network have to solve a math problem in order to construct the next block. Second, the one who gets the solution to the math problem gets the consensus permission to pick the block that should be added next to the board. 

Why is Proof of Work Necessary?

Proof of Work is important as it brings an account of trust in a trustless environment. This protocol makes sure that excessive mining does not take place. It does this by increasing the difficulty of verifying each block.

It retains the supply of the cryptocurrency and also supports the miners in order to keep the network running. At the same time, it uses limited resources like time, computational strength, and energy.

Proof of Work checks and makes sure that the users are not spending the money unnecessarily where they do not have to spend. It uses a mixture of cryptography and game theory. The PoW algorithm allows everyone to change the blockchain according to the system’s rules.

How does the POW work?

The Working of Proof of Work protocol can be summarized in brief as follows:

1) The transactions are bundled together into units generally known as blocks

2) The transactions within each block are verified for legitimacy by the miners.

3) A mathematical puzzle known as the proof-of-work problem has to be solved by the miners to account for verification.

4) The first miner who solves each block problem is being rewarded with a reward.

5) Then the verified transactions are stored in the public blockchain.

Benefits of Proof of Work

Proof of Work systems has many significant advantages. they are a perfect way of deterring spammers. If a reasonable amount of work is required for e.g. sending an email for each process, then most spammers will not have enough computing power to send a large number of unsolicited emails.

Moreover, Proof of Work frameworks can be used to provide protection for a network as a whole. This is the primary advantage of blockchains using a consensus system for the proof of work. If enough nodes compete to find a particular solution, then for any single bad actor or even a single group of bad actors, the computational power required to overwhelm and control a network becomes unachievable.

Proof of Work vs Proof of Stake

The Proof of Stake systems have the same purpose but the process is slightly different than in Proof of Work systems. There is no mathematical puzzle with the Proof of Stake. The creator of a new block, however, is chosen in a deterministic manner, based on their stake. 

The Proof of Stake includes validators instead of the miners. Some of their cryptos are locked up by validators as the stake in the ecosystem. The validators then bet on blocks they hope will be added next to the chain. When the block is inserted the validators will receive a block incentive equal to their stake. 

Evidence of Stake has some of the advantages over Proof of Service. Increased energy efficiency is the most important one. They tend to be much greener over the other one as it cuts down the energy-intensive mining process. The electricity consumed at the same time is only a fraction of that consumed in PoW.

Proof of Work Limitations

However, there are certain drawbacks or limitations associated with the Proof of Work, which can be described in detail as follows:

1) Huge Expenditures: There is a need for specialized computer hardware to run complicated algorithms for mining. The cost is also high and not affordable. In addition, the special mining pools need a massive amount of power to run, which further alleviates the cost.

2)  The uselessness of Computations: There is a lot of power required for the machines to generate a block by the miners. however, their estimates are not valid anywhere else, such as a company, science or others. 

3) 51% Attack: A 51% attack is a Proof of Work attack by the majority of the group of users, who controls the majority of the mining power. The attackers come in complete power, where they can monopolize by creating blocks and receive rewards. 


Proof of Work was the original solution to the problem of double-spending and has proven to be accurate and effective. It is required for all the miners to solve a complex sum in the Proof of Work. The winner is further determined by the person who owns the most quantity of hardware devices.

However, there are some issues that are faced by the Proof of Work algorithm that have to be considered. This includes the amount of energy it needs, the centralization of power that mining pools currently have, and the risks of an assault of 51 percent. The winner is further determined by the person who owns the most hardware equipment.

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