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 adapted to money by Hal Finney in 2004 through the idea of “reusable proof of work.” Following its introduction in 2009, bitcoin became the first widely adopted application of Finney’s idea (Finney was also the recipient of the first bitcoin transaction). Proof of work forms the basis of many other cryptocurrencies as well.”
Proof of Work is a consensus mechanism that depends on a difficult mathematical task. In blockchain, PoW consensus is used for confirming transactions, securing the network and producing new blocks. And also, PoW is the original consensus algorithm in a Bitcoin Network.
How does the Proof of Work Algorithm works?
With the PoW algorithm, miners are competing with each other to find a new block and get rewarded. In order for a miner to enter his block of transactions into the blockchain, the miner has to provide an answer or proof to a specific problem (puzzle). With using computing power, miners are trying to solve the problem (puzzle).
In the PoW algorithm, the more computing power the miner has, the more chance he/she solves the problem and with the growing number of miners, the network becomes more secure.
If we think a simple example:
I am going to choose a number from 1 to 12 and you will try to guess it by rolling a pair of dice until the two numbers are shown on the dice add up to the number that I choose. In addition, I will add three more players to the game and whoever gets the correct pair of numbers on the dice first wins the price.
This is how the Proof of Work algorithm works. Miners are trying to solve a cryptographic puzzle and whoever finds the answer, gets the reward. With more computing power, there are more possibility to solve the puzzle but still there’s a certain amount of randomness involved in it.
Pros and Cons
- PoW consensus algorithm is more decentralized when compared with other consensus algorithms.
- PoW is the first consensus protocol and it is very popular.
- Proof of Work requires too much energy and it is very costly when compared with others.
- It is possible to make a 51% attack which means 51% of malicious miners could capture the network.
PoW Coin Examples
- Bitcoin (BTC)
- Monero (XMR)
- Litecoin (LTC)
- Bitcoin Cash (BCH)
- Conceal Network (CCX)
- Turtle Coin (TRTL)
- Ryo Currency (RYO)
- Stellite Cash (XTL)