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What is Proof Of Work?

BitForex Editor
Oct 20, 2020

Have you ever thought to yourself how Bitcoin, Ethereum amongst other cryptocurrencies, are able to function effectively without the input of intermediaries or banks to verify transactions? It is through the impact of consensus mechanism like proof of work which enables peer-to-peer digital transactions. This brings us to the most important question, what is proof of work?

Poof of work can be referred to as a consensus protocol that is used by Bitcoin, Ethereum, amongst other cryptocurrencies to validate transactions that take place on their network. These networks are built on blockchain technology. Transactions are authenticated by a network of computers that make use of a cryptographic protocol to verify the accuracy of the data on the ledger. The innovation behind Bitcoin and other cryptocurrencies is based on the integration of three different technologies, which are cryptographic keys, decentralized ledger, and proof of work.

Another definition of proof of work describes it as a system that needs a feasible amount of effort to deter malicious use of computing power like in the case of launching denial of service attacks and the sending of spam emails.

Proof Of Work Explained

During the mining process, the proof of work comes into play. The process involves nodes competing among themselves in other to ensure that the information present in each transaction block is accurate, plus they also receive an award for every effort that goes into the process.

Using this reference, let’s say for a product you are 15 dollars, you trust and recognize the value of that currency because it is backed by the US federal reserve. These bodies or institutions serve as guarantors of the printed currencies value, so also does the proof of work perform the same function for cryptocurrencies. It ensures that the information contained in the blockchain is accurate and trustworthy by providing the network nodes with an incentive to verify accurate information and reject inaccurate information.

All of these take place even though they in no central institution or authority overseeing its affairs. The system promotes trust between unknown parties as they have confidence in the integrity of the consensus protocol.

How Does Proof Of Work Function?

The moment I send you a single Bitcoin, the transaction is immediately registered on a block along with various other transactions along with the information of the transactions, which is then communicated to the decentralized network where various miners, machines use their computing power to verify it with other transactions on the block.

The network nodes verify the transaction by competing among themselves to determine the solution to complex mathematical riddles. Solutions are presented on a trial and error basis until one of them is able to find the accurate number and pass the information on to the remaining machines. A consensus is achieved when a majority of the nodes agree that one miner has found a solution to the problem.

One major function of the proof of works existence is so that transactions can’t be falsified. The mechanics behind the operation of proof of work is brilliant as it basically relies on human self-interest to ensure the blockchain’s integrity.

Proof Of Work Vs Proof Of Stake

When Satoshi Nakamoto was building the first cryptocurrency in existence, he needed a way for transactions to be validated without the influence of a third party, which he achieved with the creation of a proof of work system.

Transactions are verified in a proof of work system by miners who make use of their computer hardware to determine the solution to complex mathematical equations in other for the right to add new blocks to the blockchain. It is through solving these problems that a new block can be added to the recent block on the blockchain. As earlier stated, a miner is rewarded with a transaction fee as well as a block reward, which is usually in the form of cryptocurrency like Bitcoin, when such an individual is able to solve one of the complex mathematical puzzles first.

Proof of stake, on the other hand, functions a bit differently, as it makes use of “validators” and not miners. Validators, in this case, invest their crypto as a guarantee for the opportunity to validate transactions, unlike miners who use hardware to solve complex mathematical puzzles. The right to verify transactions is based on factors such as the stake size and time period the crypto has been staked. However, the question that remains is if proof of work is equipped to power prominent cryptocurrencies such as Ethereum and Bitcoin, then why the interest in proof of stake?

Energy Consumption

When considering arguments relating to proof of work vs proof of stake, one major factor that usually comes up is the energy consumption of both consensus mechanisms. The proof stake is widely known for its minimal energy consumption, while the complex mathematical puzzles that miners are tasked with finding a solution are highly computationally intensive, which basically means their hardware requires are a large amount of electricity in other to solve the problems. While proof of stake, on the other hand, requires minimal energy to function, which would most likely benefit the environment in the long run.


one prominent feature of cryptocurrency is that it is decentralized as opposed to banks who have a central authority responsible for verifying transactions; cryptocurrencies, on the other hand, have a network of validators or miners. However, which is more decentralized between proof of work and proof of stake. Mining requires certain factors like hardware purchase, high energy consumption, amongst others, and not everyone desires to become a miner while becoming a validator; on the other hand, is more simplified.

One factor which makes proof of work more decentralized than a proof of stake is that is crypto is more likely to be distributed among users. Miners can easily sell some of their mining profits and pay electricity costs while validators don’t have any overhead cost and can continue stacking every reward, they earn which could, in turn, result in minimal distribution of crypto assets among users as well as centralization.

Though proof of stake provides a lot of benefits, it, in turn, has some disadvantages, some of which are most likely not yet to be discovered, but one can’t deny that it is an interesting development in the blockchain space. Proof of work remains a popular consensus mechanism. Though some might be of the opinion that one is better than the other, it, however, remains challenging to determine which one is the suitable choice truly.

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