Proof of Work (PoW) Meaning
What is Proof of Work?
Proof of work (PoW) is a consensus mechanism that adds new transactions to a blockchain network and maintains the network’s integrity. It is designed to solve the double-spending problem without needing a centralized authority. It also serves as an impartial way for decentralized parties to agree on the version of the blockchain that is legitimate.
The main objective of PoW is to maintain the network’s security and integrity. It achieves this through an energy-intensive process called mining.
Under a PoW system, miners verify and validate transactions and add them to a blockchain network. This is accomplished by solving a complex mathematical puzzle, the answer of which is called a hash. The first miner to solve is compensated for the “work” with network fees and a portion of newly minted coins. This compensation is known as a block reward.
Proof of work is mainly composed of “work”, which is the computational power used to solve a hash, and a reward. While the PoW algorithm helps sustain the network’s security, it has been criticized for its environmental unsustainability.
Proof of Stake vs Proof of Work vs Proof of Authority
Some alternatives to the proof of work algorithm include proof of authority (PoA) and proof of stake (PoS). The fundamental distinction between these algorithms lies in the method used to choose who gets to produce a new block.
For instance, PoA systems rely on the validators staking their reputation and identity rather than coins. The algorithm is typically reliant on the validity and trustworthiness of validators, an individual staking their reputation, and a fair standard for selecting validators.
However, in PoS, the validators are selected based on their crypto holdings or coins staked. PoW takes a different approach, where miners have to compete for the right to generate a new block by solving a complex mathematical puzzle.
Cryptocurrency networks that use a PoW consensus include Bitcoin, Litecoin, and Bitcoin Cash.