What Is Proof Of Work? Proof Of Work Explained
Crypto Guides
Crypto Guides
May 25, 2023

What Is Proof Of Work? Proof Of Work Explained

What is Proof of Work? Proof Of Work Explained

Proof-of-work is the algorithm that secures many cryptocurrencies, including Bitcoin and Ethereum. Most digital currencies have a central entity or leader keeping track of every user and how much money they have. But there’s no such leader in charge of cryptocurrencies like Bitcoin. Proof-of-work is needed to make the online currency work without a company or government running the show.

Bitcoin was the first widely used implementation of Finney's PoW concept after it was introduced in 2009. (Finney was also the recipient of the first bitcoin transaction). For secure and decentralised consensus, many other cryptocurrencies use proof of work.

Basic Overview

Bitcoin was the first to use proof of work as a crypto consensus mechanism. The concepts of proof of work and mining are intertwined. The network requires a large amount of processing power, which is why it's called "proof of work." Virtual miners from all over the world compete to be the first to solve a math puzzle to secure and verify proof-of-work blockchains. The winner gets to update the blockchain with the most recent verified transactions and is rewarded with a set amount of cryptocurrency by the network.

How proof-of-work works

Bitcoin is a blockchain, which is a decentralised ledger that records every Bitcoin transaction ever made. This blockchain is made up of blocks, as the name suggests. The most recent transactions are stored in each block.

Proof-of-work is required for new blocks to be added to the Bitcoin blockchain. Miners, the players in the ecosystem who execute proof-of-work, bring blocks to life. Each time a miner comes up with a new winning proof-of-work, which happens roughly every 10 minutes, the network accepts a new block.

Finding the winning proof-of-work is so difficult that expensive, specialised computers are the only way to provide the work miners require to win bitcoin. Miners will be rewarded with bitcoin if they correctly predict a matching computation. The more computations they produce, the more bitcoin they will most likely earn.

What calculations are the miners performing? Miners produce "hash" in Bitcoin, which converts an input into a random-looking string of letters and numbers.

The miners' goal is to create a hash that matches Bitcoin's current "target." They need to make a hash with enough zeroes in the beginning. Getting multiple zeros in a row is extremely unlikely. However, because miners around the world perform trillions of such calculations per second, it takes them about 10 minutes on average to reach this goal.

Which cryptocurrencies use proof of work?

Aside from Bitcoin, pretty much all the cryptocurrencies based on or forked from it also use proof of work. These include:

  • Bitcoin Cash
  • Bitcoin SV
  • Litecoin
  • Dogecoin
  • Bitcoin Gold

There are also a wide variety of other cryptocurrencies not based on Bitcoin that currently use proof of work, including:

  • Ethereum
  • Ethereum Classic
  • Monero
  • Zcash
  • Kadena
  • Ravencoin
  • Siacoin
  • Horizen
  • DigiByte

Role of PoW in Cryptocurrencies

People are encouraged to spend the resources needed to contribute legitimate blocks to blockchains by using the proof of work mechanism.

A hash is designed to be technologically challenging to calculate. Using a proof of work method that requires members to invest large sums of money in computing resources develops a strong disincentive to attack the validity of the blockchain network. There is also a decrease in the likelihood that the cryptocurrency would lose its trust if one Bitcoin is spent several times, known as "double-spending."

According to Knottenbelt, "Proof of work is how miners (block publishers) show the world that they have put in the necessary labor to construct a well-established block of payment process to add to the blockchain" When you look at it from a miner's point of view, you can say that they're converting the time and effort that goes into searching for legitimate blocks (for which they normally buy specialized high-performance hardware) into cash.

Let’s Move to the latest news!

Following the draught of the European Union's (EU) proposed legal framework for managing virtual currencies, known as the Markets in Crypto Assets (MiCA) framework, the use of Proof-of-Work (PoW) cryptocurrencies was questioned.

The European Parliament's Committee on Economic and Monetary Affairs, however, voted against the ban on Proof-of-Work mechanisms, which underpin popular cryptocurrencies such as Bitcoin and Ethereum, on Monday, March 14.

Indeed, a provision in the parliament that would have forced PoW cryptocurrencies to switch to more environmentally friendly mechanisms failed to receive the necessary votes.

It's important to distinguish between Proof-of-Work and Proof-of-Stake. PoW is the consensus mechanism that underpins digital assets that require a lot of energy to operate, such as Bitcoin and Ethereum.

Pros and Cons of PoW


A high degree of safety is provided.

Transactions can be verified in a decentralized manner.

Miners are able to receive cryptocurrency incentives by participating in this program.

With Bitcoin running for over a decade without a serious outage or hack, proof of work arguably gives a higher level of safety than alternative forms of unanimity.


It's unproductive because of the high fees and slow speed of the payment process.

Consumption of a lot of energy.

Mining might necessitate a large investment in machinery.

Why is Proof of Work necessary?

The blockchain is a large database that any user can access to see if funds have been spent previously. Consider this scenario: you and three friends each have a notepad. You write it down whenever one of you wants to make a transfer of whatever units you're using – Alice pays Bob five units, Bob pays Carol two units, and so on.

Another complication is that you must refer to the transaction from which the funds were obtained each time you make a transaction. So, if Bob paid Carol with two units, the entry would be as follows: Carol receives two units from Bob's previous transaction with Alice.

We now have a way to keep track of the units. Everyone will know right away if Bob tries to make another transaction with the same units he just sent to Carol. The transaction will not be added to the notepad by the group.

In a small group, this might work well. Because everyone knows each other, they'll probably agree on who should enter transactions into the notepad. What if we want to invite 10,000 people? The notepad concept doesn't scale well because no one wants to entrust their personal information to a stranger.

This is where the concept of Proof of Work comes into play. It ensures that users do not spend money they do not have permission to spend. A PoW algorithm uses a combination of game theory and cryptography to allow anyone to update the blockchain according to the system's rules.

Future of PoW

Because of the current global energy problem, the enormous energy consumption of Bitcoin's and Ethereum's current unanimous system, known as proof of work, will likely not go ignored. Unlike Ethereum, Bitcoin is projected to continue to use a lot of energy, but this will not come without significant problems, as the consensus protocol is expected to remain in place.

Even without accounting for the resources used to create the servers, Bitcoin is projected by the University of Cambridge to consume roughly 0.5% of global energy usage, more than the Netherlands. Utilizing even 0.5% of the world's electricity during a time of global energy scarcity isn't going unnoticed. To make things even worst, as Bitcoin's cost has gone up, so has the number of electricity miners has been using, as they can afford the extra more while still making getting a profit. Increasing the Bitcoin cost is projected to lead to a rise in energy use, further complicating the problem.