Proof Of Work

 

Proof-of-Work (or PoW) is the most common consensus algorithm type for cryptocurrencies and the original consensus algorithm in a Blockchain network, used to confirm transactions and produce new blocks to the chain. It originated in Bitcoin, and this is how this cryptocurrency works. 


In a network, users send each other digital tokens. A decentralized ledger gathers all the transactions into blocks. The responsibility of confirming the transactions and arranging blocks bears on special nodes called miners. To generate proof of work, a computer has to solve a challenge, which is a computationally heavy problem. When a computer on a proof-of-work based network finds a solution, it publishes it along with the transactions that the computer has been observing while cracking the problem. The owner of this computer collects the transaction fees and a reward for generating a block. The entire process is called mining. Miners compete against each other to complete transactions on the network and get rewarded. The main working principles are a complicated mathematical puzzle and a possibility to easily prove the solution.

 

Cryptocurrency mining, or cryptomining, is a process in which transactions for various forms of cryptocurrency are verified and added to the blockchain digital ledger. Individual blocks added by miners should contain a proof-of-work. Also known as cryptocoin mining, altcoin mining, or Bitcoin mining (for the most popular form of cryptocurrency, Bitcoin), cryptocurrency mining has increased both as a topic and activity as cryptocurrency usage itself has grown exponentially in the last few years.

 

Each time a cryptocurrency transaction is made, a cryptocurrency miner is responsible for ensuring the authenticity of information and updating the blockchain with the transaction. The mining process itself involves competing with other cryptominers to solve complicated mathematical problems with cryptographic hash functions that are associated with a block containing the transaction data.

 

The result of “mining” is twofold. First, when computers solve these complex math problems on the network, they produce new coin. And second, by solving computational math problems, miners make the network trustworthy and secure, by verifying its transaction information. Nevertheless, mining is energy consuming, and the amount of energy needed is constantly increasing, which can lead to unsound competition.