What Is Proof of Work (PoW)?
The Proof of Work (PoW) consensus mechanism is a method of validating transactions, which requires miners to solve complex mathematical problems to add new blocks to the blockchain. Used by Bitcoin and many other public blockchains, PoW — the original consensus mechanism — is generally regarded as the most reliable and secure of all the consensus algorithms. However, it has drawn criticism for its high costs, energy-intensive process, and limitations with regard to scalability, leading many to seek out alternatives like Proof of Stake (PoS).
How Does PoW Work?
Every cryptocurrency has a blockchain, which is a public ledger containing records of all transactions arranged in sequential ‘blocks’. Each of these blocks of data needs to be independently verified by the miners on the network before they can be added to the blockchain. This system helps to secure the blockchain against fraudulent activity and prevents ‘double-spending’.
In order to guarantee that all miners on a blockchain network agree on a single version of history, blockchain networks like Bitcoin implement PoW, where miners compete against one another to solve extremely complex computational puzzles using high-powered computers (also called ‘nodes’). The first miner to come up with the unique 64-digit hexadecimal number (‘hash’) earns the right to form the new block and confirm the transactions.
Once other participants in the network verify the data to be added to the blockchain as correct and valid, the winning miner — or ‘validator’ — is then rewarded with a predetermined amount of cryptocurrency, known as a ‘block reward’. These rewards incentivise the network to act honestly and only record true transactions.