Crypto is becoming increasingly popular and is widely used in various areas. Blockchain uses two consensus algorithms — PoW (Proof of Work) and PoS (Proof of Stake) — to validate transactions.
In the Proof of Work mechanism, miners solve mathematical problems in order to validate transactions. This process requires a vast amount of computational power and energy. Because of this, it has attracted a lot of criticism from environmental activists.
What is Proof of Work (PoW)?
Proof of Work (PoW) is an algorithm used in blockchain networks to validate transactions and ensure their security. It was first introduced in Bitcoin and has been chosen as the algorithm for many other cryptocurrencies.
Blockchain technology is designed to transfer two types of data: transactions and blocks. A transaction requires only a private key (provided by a crypto wallet). A block contains a list of transactions, and it is the consensus algorithm that determines how a transaction is registered in a block.
PoW prevents double-spending of coins. If transactions were not validated by the entire network, it would be possible to spend the same coin simultaneously in two different transactions.
In PoW, each transaction is represented as a hash — a long and unique string of characters. Miners must generate a hash that meets certain requirements. For example, the first few characters of the hash must be zeros.
Miners start searching through different hashes, adding random numbers to them until they find a hash that meets the conditions. When the miner finds a valid hash, they send the block to the network and transactions are registered in this block.
The most prominent PoW blockchain is Bitcoin. It is based on mining — the generation of new blocks by miners. Each block appears after a miner solves a complex mathematical problem that requires significant amounts of computing resources. As soon as a transaction is attempted in the network, nodes owned by miners simultaneously validate it. If a transaction is not validated by all consensus nodes, it simply cannot be registered in the network.
The Proof of Work algorithm provides protection against fraud in the blockchain network. It is impossible to create fake nodes because actual computing power is required for participating in transactions, and it does not make sense for miners to try and engage in fraud because they would spend resources anyway but would not be able to gain profit because of the network’s design.
The Proof of Work algorithm has the following advantages:
- Security. The PoW consensus algorithm provides a high level of security for a blockchain network because an attack on a cryptocurrency blockchain requires miners to control more than 50% of the network’s mining hash rate.
- Decentralization. Proof of Work allows network participants to freely join and leave the network, promoting decentralization and system sustainability.
- Validation. In Proof of Work, transactions are validated based on mathematical calculations, which makes the process transparent and verifiable.
Drawbacks of Proof of Work
- High energy consumption: solving mathematical problems in a PoW blockchain requires a significant amount of energy and computing resources, which can make it unprofitable and bad for the environment.
- Transaction speed: due to the complexity of solving problems and competition among miners, transaction validation can take long in Proof of Work blockchains.
- Centralization: in Proof of Work, miners with higher processing power have a better chance of confirming transactions, which can lead to centralization of control over the network.
Conclusion
PoW is considered more secure than its competitor, PoS, because an attack on the network requires majority network control. However, a blockchain can still be vulnerable to a 51% attack. Many users also refuse to use crypto mined using PoW blockchains because of their principles.
Miners spend immense amounts of electricity, and their equipment is responsible for significant heat emissions into the atmosphere. It can have a negative impact on the environment, and PoW opponents have drawn attention to environmental issues. That is why the more environmentally friendly PoS consensus algorithm has been invented and has become so popular.
In the future, both Proof of Work and Proof of Stake algorithms can be expected to develop and improve. Some projects already offer innovations that combine elements of both algorithms to achieve better results. It is also possible that other new algorithms will emerge that will possess the advantages of PoW and PoS.
