Home - Bitcoin - Explainer: What is Proof-of-Work (PoW)?


September 25, 2022

Explainer: What is Proof-of-Work (PoW)?

Roughly put, PoW is a method that is used by cryptocurrencies as a means of ensuring the integrity of newly added transactions to a distributed ledger known as a blockchain.

Decentralized networks such as those utilized by cryptocurrencies and other defi applications use PoW since these networks lack any central controlling body. Thus, the integrity of newly generated data must be verified via the use of proof of work.

Bitcoin, which was released in 2009, is credited as being the first use of Finney’s Proof of Work concept to garner widespread support. Finney was also the recipient of the first bitcoin transaction. Proof of work is the basic protocol behind Bitcoin and a wide variety of other cryptocurrencies. It enables safe, decentralized consensus.

What is PoW?

The term “proof of work” (PoW) refers to a system that requires a not little but possible amount of effort. This is in order to prevent silly or hostile uses of computing power. For example, sending spam emails or casting denial of service attacks are both examples of foolish or malicious uses of computing power.

In 2004, Hal Finney applied the theory to the protection of digital currency by creating the “reusable proof of work” concept and using the SHA-256 hashing algorithm. This allows for the concept to be repurposed.

How Does It Work?

The verification and recording of bitcoin transactions are handled through a consensus process known as the proof-of-work model.

A blockchain is a public ledger that records transactions in discrete blocks. All cryptocurrencies use the blockchain. For cryptocurrencies based on proof-of-work consensus, every block of transactions has a unique hash assigned.

Also Read:  Grayscale seeks Wall Street partnerships for a Bitcoin ETF

The crypto miner produces a target hash that has a value. The value is either less than or equal to the value of the block in order for the block to be confirmed.

Miners rely on mining hardware that can fast produce calculations so that they can achieve their goals. The goal here is to be the first miner to come up with the desired hash. Since only that miner will be able to update the blockchain and get the associated cryptocurrency incentives.

The proof of work protocol used in bitcoin is successful because finding the target hash might be hard. But ensuring it does not require much effort.

The procedure is complicated enough to exclude the possibility of meddling with the transaction records. On the other hand, once a target hash has been discovered, it is simple for other miners to confirm it.

Why Proof-of-Work?

The “double-spend problem” was one of the challenges that, in the past, hampered efforts to create a digital currency that could actually function as a medium of exchange.

Because crypto is merely data, there has to be a method to stop users from spending the same units in other locations before the system can record the transactions.

This mechanism must ban users from spending the same units in different areas.

Anyone who has ever produced a file on a computer by copying and pasting can probably imagine how you could spend digital money twice, even ten times or more.

While it would be difficult to spend the same physical dollar bill on two separate assets, it is possible to spend digital money multiple times.

Also Read:  85,000 Bitcoin Options Contracts Set to Expire This Friday

Satoshi Nakamoto, the Bitcoin creator, solves the double-spend issue by the consensus method. Proof of work helps prevent duplicate spending by motivating miners to verify the goodness of new crypto transactions before adding them to the distributed ledger that is blockchain.

Pros and Cons


  • Used broadly by many of the most famous cryptos: Proof of work is the technique the most popular and widely used digital currency, which is bitcoin, uses.
  • Exceptionally safe: A crypto network is made safe by the actual computer resources needed by the proof of work protocol. This is because changing a crypto’s blockchain demands control over more than half of the computational resources used by the crypto network.
  • Miners of crypto get rewards for their work in letting new transactions. If they are able to successfully validate fresh blocks of cryptocurrency transactions, miners may make a profit.


  • Ineffective, marked by very slow transaction speeds and absurd costs.
  • High energy use.
  • Mining naturally demands pricey equipment.

Closing Thoughts

Proof-of-work is a consensus technique that assures miners will only add a new block to the blockchain of a cryptocurrency. This is after generating a significant amount of computing effort to show that the block is genuine. This prevents invalid blocks from being added to the chain.

When it comes to the two primary consensus processes that crypto uses for confirming transactions on blockchains, proof of work is by far the more prevalent option.

Miners that use proof of work assist guarantee that the blockchain is used for recording only genuine transactions. This is despite the fact that this method is not without its drawbacks.

Also Read:  Before Investing in Bitcoin, Consider These 3 Things

Miners donate to the safety of the blockchain by operating in this manner. So warding off any assaults that may result in financial losses for companies who conduct their business using blockchain technology.

On the other hand, the consumption of a significant amount of power is necessary for the evidence of labor. This is something that skeptics of Bitcoin would contend creates too much of an environmental effect. To warrant the better security it gives in compared to other methods such as proof of stake. [Critics] of Bitcoin would argue that this is a problem.