Proof of work (PoW) is a complex system used in some cryptocurrencies like Bitcoin (BTC) to achieve consensus on the validity of transactions and secure the blockchain. Imagine a massive, public ledger – that’s the blockchain – where every transaction needs prior verification before being included. In a decentralized network with no central authority, PoW establishes trust and prevents fraud.
This is how it works:
- Miners: Powerful computers called miners race to solve cryptographic puzzles with immense computational difficulty.
- The Proof of Work: Solving these puzzles requires a significant amount of processing power and energy consumption – this is the “work” in proof of work.
- Winner Takes the Block: The first miner to crack the puzzle wins the right to add the next block of verified transactions to the blockchain.
- Network Verification: Other miners quickly check if the answer is correct, adding another layer of security.
- Reward Time: The winning miner receives a cryptocurrency reward for their efforts.
PoW secures the blockchain by making it incredibly difficult to tamper with transaction records. Adding a fake block would require solving the puzzle again and then redoing the work for all subsequent blocks – a nearly impossible task for malicious actors.
Proof of Stake (PoS) vs. Proof of Work (PoW):
Unlike PoW’s miners and computational puzzles, Proof of Stake (PoS) relies on validators who have a vested interest in the network’s security by staking their own cryptocurrency holdings.
« Back to Glossary Index