- Category
- >Cryptocurrency
What is Proof of Work in Crypto and How does it Work?
- Pragya Soni
- Mar 26, 2022
“Bitcoin is exciting to me because it shows how cheap transactions can be.”
– Bill Gates
This statement of Bill Gates related to Bitcoin reflects the authenticity of Cryptocurrency. From teenagers to the growing population, everyone around the globe is currently utilizing Cryptocurrency. It has proven a boon to both investors and miners.
In case you don't know about miners, Cryptocurrency miners are the people involved in the network who validate the transactions. They are responsible for adding further blocks in the blockchain.
For adding blocks or for mining, the miners use algorithms and tricks. One of such traditional approaches includes proof of work, as the name suggests it is dependent on the amount of work, i.e. computing work here, of the miner.
In this blog, we will study about the proof of work, its advantages and disadvantages.
What is Proof of Work?
PoW expanded as Proof of Work. It is described as a system that requires a feasible amount of effort in order to detect malicious use of computing power. These frivolous uses can be activities such as sending spam emails or launching denial of service attacks.
It is a decentralized consensus mechanism. It requires members of a network to expend effort to solve a mathematical query so as to prevent people from gaming into the system. It is used in cryptocurrency mining. It can be equipped for both validating transactions and mining new tokens.
Proof of work helps in proceeding transactions peer-to-peer in a secure manner without raising the demand for a trusted third party. Also, it requires a huge amount of energy at scale level as mining is an energy consuming process. Another alternative to Proof of Work is Proof of Stake.
Also Read | Pool Mining
How do Proof-of-work procedures work?
You might be wondering how proof-of-work actually works in real life. Well, the process is quite clear and simple. As mentioned above, proof of work is a consensus mechanism used to validate and record the cryptocurrency transactions.
A blockchain is dedicated to every cryptocurrency in the crypto network. A blockchain is made up of blocks of transactions, and basically defined as a public ledger. As proof of work is used to validate transactions.
Each transaction of crypto is assigned with a hash. And for that transaction to validate the crypto miner must have to generate a target hash that is lower or equal to the sample block.
And to generate this kind of target hash, miners use mining devices that quickly generate computations. The one miner who generates the target hash first and faster than other miners is the one who updates the blockchain. Also, only he receives crypto rewards.
Thus, the generation of target hash is a difficult thing. But validating is easy, and maybe that’s the reason why proof of work goes well in cryptocurrency. But the process is strong enough to prevent the manipulation of transaction records. Also, validation becomes easy by applying this process.
Also Read | Difference between Bitcoin and Ethereum
Example of Proof of Work
To understand the working of proof of work more clearly, let us go through an example of bitcoin. See how Bitcoin uses proof of work to maintain the integrity of the blockchain.
As a bitcoin transaction occurs in the network, it goes through a security verification. The transactions are categorized into blocks and are queued in order to be mined. Then particular proof of work generates a hash for the block. For bitcoin, it is SHA-256 and generates a 64-character long string.
The miners community then rushed to generate a target hash. The miner that generates the hash first gets the rewards. The miners get rewards in the form of newly minted coins and transaction fees.
By applying a proof of work algorithm a new block is added to the blockchain after every 10 minutes. Thus the algorithm adjusts the difficulty of bitcoin mining depending on the speed and ability of the miners to mine it.
Advantages and Disadvantages of Proof of Work
Advantages and Disadvantages of Proof of Work
Some obvious advantages offered by Proof of Work are:
-
PoW has a high level of security.
-
Proof of Work provides a decentralized method of validating transactions.
-
Proof of Work ensures the miners to earn crypto rewards
The disadvantages offered by Proof of Work are:
-
The process has slow transaction speeds and expensive fees.
-
Energy usage is quite high.
-
The equipment requirement is technical and high.
Also Read | Dark Side of Cryptocurrency
Key Differences between Proof of Work and Proof of Stake
Proof of Stake is the alternative to Proof of Work. Like proof of work it is also a consensus algorithm. The algorithm decides who will validate the next chain in the blockchain.
But unlike proof of work, it is not decided on the time limit by which the miners can solve the cryptographic puzzle, it is basically decided on the numbers of cryptographic coins a miner holds. Thus, cryptographic computing power has no role in proof of stake algorithms.
The major differences between proof of work and proof of stake are as follows:
-
In proof of work the probability of mining depends on the quantity and quality of computational calculations done by the miner, while in proof of stake this probability depends on the amount of stake a person holds.
-
In proof of work the reward is given to the miner who solves the puzzle first, while in proof of stake reward is given in the form of network fee.
-
In proof of work, miners have to complete puzzle solving using computer process power to add a block in the blockchain. While in proof of stake there is no competition as a block creator.
-
In order to hack proof of work, hackers need 51% of computational power, while to hack proof of stake, the minimum requirement is 51% hold on crypto currency which is practically impossible. Thus we can conclude that proof of stake is safer than proof of work.
-
Proof of work derives less energy while proof of stalk requires more energy.
-
The cost of implementation of proof of work is less, but proof of stake is more costly.
-
The proof of work is more proven than proof of stalk systems.
-
Proof of work requires standardized equipment to optimize processing power while standard server grade is enough in proof of stake.
-
The initial investment required in proof of work is hardware requirement, while initial investment required in proof of stake is to buy stake and build status in the market.
-
Bitcoin is the most common crypto currency that uses proof of work, while common currencies that use proof of stake are Tezos, Cardano, Cosmos and Lisk.
Also Read | Cryptographic Key Management
The proof of work employs different mechanisms such as SHA-256, SHA-3, scrypt-jane, scrypt-n, etc. Though, it is quite a risky and time consuming algorithm that consumes so much resources.
These drawbacks of proof of work have given rise to several alternative approaches such as proof of stake, proof of burn. Proof of activity, proof of capacity, proof of activity, and proof of importance. But still it is the most traditional approach to mine popular cryptocurrencies like Litecoin, Ethereum, Bitcoin and Monero coin.
Share Blog :
Or
Be a part of our Instagram community
Trending blogs
5 Factors Influencing Consumer Behavior
READ MOREElasticity of Demand and its Types
READ MOREWhat is PESTLE Analysis? Everything you need to know about it
READ MOREAn Overview of Descriptive Analysis
READ MOREWhat is Managerial Economics? Definition, Types, Nature, Principles, and Scope
READ MORE5 Factors Affecting the Price Elasticity of Demand (PED)
READ MORE6 Major Branches of Artificial Intelligence (AI)
READ MOREDijkstra’s Algorithm: The Shortest Path Algorithm
READ MOREScope of Managerial Economics
READ MOREDifferent Types of Research Methods
READ MORE
Latest Comments
drukker9800
Apr 07, 2023It’s so unfortunate the number of people who invested their money into the cryptocurrency market but ended up being a victim of the crypto investment scam. I was logged out of my account without any explanation or response from the crypto investment site after I had invested all my entire savings into crypto. I was hurting so bad but I was very fortunate to come across a reliable and trustworthy cryptocurrency recovery team Astraweb, this amazing cryptocurrency recovery team was able to recover my money from my locked account. Truly grateful for their splendid service and support. You can easily reach them via E-mail: Astraweb@cyberdude(.)com
triciaarnold853
Apr 23, 2023RECOVERY MASTERS FOR LOST USDT RECOVERY Recovering a total of $ 75610usdt lost in my trading account was the last thing I thought would be possible luckily enough RECOVERY MASTERS a special group of licensed Hackers came to my rescue.I had lost my account to an internet imposter who pretended to be a broker and had denied me the access of the account for more than a month and had to seek help from the team who recovered the account in a span of 49 hours .They offered incredible services and were highly Professional to work with.Incase you need their services.Email (Recoverymasters@email.cz).
triciaarnold853
Apr 23, 2023RECOVERY MASTERS FOR LOST USDT RECOVERY Recovering a total of $ 75610usdt lost in my trading account was the last thing I thought would be possible luckily enough RECOVERY MASTERS a special group of licensed Hackers came to my rescue.I had lost my account to an internet imposter who pretended to be a broker and had denied me the access of the account for more than a month and had to seek help from the team who recovered the account in a span of 49 hours .They offered incredible services and were highly Professional to work with.Incase you need their services.Email (Recoverymasters@email.cz).
conraddonad359
May 08, 2023The day i was scammed was the same day i lost my daughter, i was totally destroyed emotionally for 3 month. i didn't have a dime left in my bank besides my credit. all my life savings was cleared from my bank by some investment scammers which i shared my banking details with. the police and the bank only filed a report and closed the case, i was left all alone to suffer it and i can swear it was a living nightmare. Not until my in-law introduced me to his old college mate who is now a hacker, he lives in united state and is very dedicated to his recovery work. it took him only 2 days to recover everything through a system he called "wizard asset-finder recovery". i know very little about what he did but i got everything back. it feels so so miraculous to find a patrick. i would drop his contacts below just because i am over joyous, kindly message him and help me thank him more for saving my life from the pit of hell. patrickbenardwizard@gmail.com and Whatsapp : +1(908)718-7855
gregorychristine976
May 12, 2023Have you gone through the similar loss of bitcoins to fraudulent online investments as I did or a misplaced wallet, perhaps? If you wish to recover your money or need legal guidance on how to proceed, get in touch with Gary McKinnon right away. I misappropriated roughly 5 BTC through online investment fraud. I anticipated that I would get a monthly return of 50% on my investment. That's how I got ripped off. I devoted a long time looking for directions on how to restore it before I fortunately came across an article about Gary McKinnon. Due to the openness and humility of Gary McKinnon service, I immediately got in touch with them and felt at ease doing so. Within 24 working hours of contacting them, I had received a full refund. I had to send my own review as well because I found it so amazing. The best idea is actually to use the Gary McKinnon team. For more information contact Gary McKinnon via email: garymcKinnon@technologist.com, Also through WhatsApp:+1(507) 217-9172. Thank you, Christine.
albertaaura99
May 19, 2023Hello to everyone. According to statistics, digital trading (Forex, Crypto) is the best option to earn money working from home. However, scammers have made it impossible for anyone to profit from trading. Many people have been scammed and have lost their life savings as a result of scammers. I was previously a victim of digital trade fraud, but with the help ofJeanson James Ancheta wizard, I was able to retrieve my lost assets. He also showed me the trick of trading as well as the best method to enter the market and when to exit the market. He is giving away free tutorials on how to become a great trader and how to regain your lost dollars. Please contact him right away. Send an email to jeansonjamesanchetawizard62@gmail.com Whatsap Nunmber: +31617020375 Telegram Nunmber: +31684518136 Thank Jeanson James Ancheta wizard.
oteewg771f52217ef54dd5
Jun 29, 2023I have been looking for a way to invest in a bitcoin investment company. I contacted some companies but was not convinced by their explanations. I was researching and came across a binary options investment company. The investor made everything real and legitimate in such a way that you wouldn’t believe it was all a scam. Everything was still going well last week when I requested a withdrawal. I was told to invest more until it reached my withdrawal limit, then I could withdraw. I stopped talking to them and started looking for a way to recover my money because I didn’t want them to notice my next plans. All thanks to Aarongabriel310@gmail.com He puts an everlasting smile on my face by getting back my lost funds. I will keep recommending your service to anyone I know..
jeffreywalker2900a72a316201e400e
Oct 30, 2023It may be quite painful to lose Bitcoin, both monetarily and emotionally. When significant crypto-assets are lost, whether as a result of a hardware malfunction, a hack, or a forgotten password, people may feel upset and powerless. In the quest to recover lost Bitcoin, finding a reliable and trustworthy recovery service is paramount. Such a service can provide the expertise and professionalism needed to navigate the complexities of the cryptocurrency world and increase the chances of successful recovery. Digital Assets Recovery has established a strong reputation in the realm of lost Bitcoin recovery. With a team of skilled professionals and years of experience, they have become known for their effectiveness in navigating the complex world of cryptocurrency and reuniting individuals with their lost funds. When I found myself in the unfortunate position of losing my hard-earned BTC, I knew I needed professional help. After contacting several hackers, who unfortunately only made matters worse and took more of my money, I decided to reach out to Digital Assets Recovery and they were the one who successfully gained access and helped me recover my lost BTC. Contact them via email : digitalassetsrecovery(@)writeme(.)com & their webpage is www.digitalassetrecovery.info Thank you.
Recoverywizardsambankman
Oct 31, 2023I lost all of my savings investing in cryptocurrencies, which completely shocked me. I never thought it would turn out to be a fraud and that I would lose everything. Before I realized I had been duped, it had been going on for weeks. Fortunately for me, I came across a post on a bulletin about PRO RECOVERY WIZARD SAM BANK MAN CYBER SECURITY SERVICES. just when all hope had vanished and I was about to go bankrupt. The speed with which they located the fraudsters and retrieved my cryptocurrency funds astounded me. They provided excellent service, and I heartily thank them for it. I suggest anyone who wants to immediately recover monies to contact them. You should reach out to them by using .. Email..Recoverywizardsambankman@cyberservices.com Whats App Number : +1 980 238 1523..
scarlettava79087d47fe294384631
Mar 24, 2024I want to extend my sincere gratitude for Miss Edna an expert in the recovery agency 'Refund Policy's assistance in helping me recover the cryptocurrency that I lost due to unfortunate circumstances. Your expertise and professionalism have been invaluable throughout this process. When I first contacted them, I was in a state of distress and uncertainty. However, her guidance and support provided me with much-needed reassurance and hope. Her efforts to navigate the complexities of the situation and facilitate the recovery process were truly commendable. Thanks for her diligent work and dedication, I am relieved to say that I have successfully regained access to my lost funds. Your assistance has not only resolved a difficult situation but also restored my confidence in the potential for positive outcomes. I am deeply grateful for her assistance and would like to express my heartfelt appreciation for her help. Her expertise and commitment to assisting individuals in challenging situations are truly commendable. I will simply put their reaches here incase anyone has any same issue as me and want to get their funds back. Thank You. Wassap : +1 ( 6 5 7 ) 2 6 2 4 4 8 2 REFUNDPOLICI (AT) GMAIL (DOT) COM