What is proof of work?

Proof of Work is the algorithm that secures many cryptocurrencies, including Bitcoin and Ethereum. Most digital currencies have a central entity or leader who tracks each user and how much money they have. But there is no such leader in charge of cryptocurrencies like Bitcoin. Proof of work is required for online currency to work without a business or government running the show.

Specifically, proof of work solves the “double spending problem”, which is more difficult to resolve without a responsible manager. If users can double their coins, it inflates the overall supply, depreciating everyone’s coins and making change unpredictable and worthless.

Double spending is a problem for online transactions because digital stocks are very easy to replicate, making it trivial to copy and paste a file or send an email to multiple people.

Proof of Work makes doubling digital money very, very difficult. This is pretty much what it sounds like: “proof” that someone has done a significant amount of math.

How proof of work works

Bitcoin is a blockchain, which is a shared ledger that contains a history of every Bitcoin transaction that has taken place. This blockchain, as the name suggests, is made up of blocks. Each block contains the most recent transactions.

Proof of work is a necessary part of adding new blocks to the Bitcoin blockchain. The blocks are called to life by minors, ecosystem players who run proof of work. A new block is accepted by the network each time a miner submits a new winning proof of work, which occurs approximately every 10 minutes.

Finding winning proof of work is so difficult that the only way to provide the work miners need to earn bitcoin is through expensive specialized computers. Miners will earn bitcoins if they guess a corresponding calculation. The more calculations they produce, the more likely they are to earn bitcoins.

Exactly what calculations are miners doing? In Bitcoin, miners spit out what is known as a “hash,” which turns an entry into a string of random-looking letters and numbers.

The goal of the miners is to create a hash corresponding to Bitcoin’s current “target”. They should create a hash with enough leading zeros. The probability of getting multiple zeros in a row is very low. But miners around the world are doing billions of these calculations per second, so it takes them about 10 minutes on average to reach that goal.

Whoever reaches the goal first wins a lot of bitcoin cryptocurrency. Then the Bitcoin protocol creates new value for the miners to hash, and the miners start the race again to find the winning proof of work.

Proof of Work FAQ

Why do minors follow the rules?

Miners earn bitcoin rewards for each block for which they find the solution. This is what drives them to mine in the first place.

This monetary reward also pushes them to follow the rules – not to double spend their money, for example. Suppose Alfred the Miner finds a winning hash for a block. If Alfred submits the solution with the block but breaks the rules within the block – say, spends coins more than once – the rest of the Bitcoin network will reject Alfred’s block. Alfred will lose all the bitcoins he should have earned. The threat of losing bitcoin rewards keeps miners honest.

Why is proof of work necessary?

The purpose of proof of work is to prevent users from printing extra coins they haven’t earned or from doubling expenses. If users could spend their coins more than once, it would effectively render the change worthless.

In most digital currencies this problem is easy to solve. The bank that is in charge of the system keeps track of each person’s amount of money. If Alice sends Bob $ 1, the bank deducts $ 1 from Alice and gives Bob $ 1.

But in cryptocurrency, there is no such entity. Proof of work provides a solution.

Who invented the proof of work?

Bitcoin creator Satoshi Nakamoto invented proof of work to get Bitcoin off the ground. No one knows who Nakamoto is, or if the name is an alias.

What are the issues with proof of work?

There are at least a few issues with proof of work:

  • High energy consumption: Bitcoin consumes so much energy like all of Switzerland because of the proof of work. And its power consumption is increasing as more miners join the hunt for bitcoin, although some are powered by renewables.
  • 51% attacks: If a mining entity is able to accumulate 51% of Bitcoin’s mining hashrate, then it can temporarily flout the rules, double coins, and block transactions.
  • Mining centralization: Proof of work consists of creating a currency without a single entity in charge. However, in practice the system is somewhat centralized, with only three mining pools controlling almost 50% of the computing power of Bitcoin. Developers are at least trying alleviate this problem, Nevertheless.

Why more mining power means more safety?

The more computing power is invested in securing Bitcoin, the more resources a potential attacker needs to successfully attack Bitcoin.

Which cryptocurrencies use proof of work?

Most cryptocurrencies use proof of work, although some are experimenting with other ways to secure their networks. The most popular cryptocurrencies using proof of work include:

  • Bitcoin
  • Ethereum (although Ethereum recently started the long process of transitioning to Ethereum 2.0, an upgrade that will move cryptocurrency to potentially greener proof of stake.)
  • Bitcoin Cash
  • Litecoin
  • Cash



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