What is Proof-of-Work (PoW) in Cryptocurrency?
Bitcoin is the standout Proof-of-Work blockchain. This consensus algorithm was the default for early blockchains, with the likes of Litecoin and Dogecoin also implementing the same. However, it lost its appeal when Bitcoin’s notorious scalability issues and environmental impact became apparent, and the Proof of Stake consensus–and alternatives– took the helm.
What Is A Proof-of-Work Protocol?
Proof-of-Work is a type of algorithm that is used to verify and validate transactions on a blockchain. The system requires nodes to perform a certain amount of work, or “proof,” to verify a block of transactions. This work can take the form of computationally intensive tasks, such as solving complex mathematical problems. Once a node has verified a transaction, it can then add it to the blockchain. All participating nodes engage in a competitive process where parties show others their computational effort. Bitcoin mining involves this effort, and it has evolved to favor specialized mining equipment with significant processing power. Therefore, proof of work mining is not viable using regular PCs.
Which Blockchains Use Proof-of-Work?
There are a number of different blockchains that use proof-of-work (PoW) as their consensus algorithm. Bitcoin, the first and most well-known cryptocurrency, uses PoW to secure its network and confirm transactions. Ethereum, the second-largest cryptocurrency by market capitalization, also currently uses PoW but is switching to POS for scalability and sustainability reasons. Other notable blockchains that use PoW include Litecoin, Bitcoin Cash, and Monero. Today, most new blockchains use either POS or hybrid consensus algorithms. Still, PoW is a popular choice for blockchain developers because it is seen as a more secure and robust consensus algorithm than alternatives like proof-of-stake (PoS). PoW requires miners to solve complex computational puzzles in order to add new blocks to the chain, which makes it very difficult for bad actors to manipulate the blockchain. Additionally, PoW blockchains tend to be more decentralized than PoS blockchains, as anyone with the right equipment can become a miner and participate in consensus.
Is Pos Better Than Pow?
While PoW blockchains are typically more secure and decentralized than their PoS counterparts, they also come with some drawbacks. PoW mining is a very resource-intensive process, and it can be difficult to achieve the scale needed to make a PoW blockchain viable. Additionally, PoW blockchains tend to be slower and more expensive than PoS blockchains. Instead of expending computer resources to mine, POS requires miners to lock (stake) cryptocurrency to participate in transaction verification. The more coins a user stakes, the greater their chances of being selected to validate a block. This method saves on computer resources and the electricity necessary to mine cryptocurrency. Bitcoin mining has faced considerable criticism for electricity consumption, and POS blockchains offer viable alternatives.
How Are Blocks Mined Using Proof-of-Work?
Mining blocks on POW networks involves bundling transactions to form a prospective block of transactions. The blocks come at a frequency of once every ten minutes. Therefore, computers present their computational proof within this timeframe. If successful, they add the block of transactions before starting over again. Each block comes with the reward of 6.25 Bitcoins, which goes predominantly to highly efficient ASIC miners.
