Whether you’re new to cryptocurrency or you’ve been doing research for a while you’ve most likely heard the debate between  PoW otherwise known as Proof of Work and its counterpart Proof of Stake. If you’re interested in learning about PoS check out our video we just published over it.

Some investors think Proof of Work is better and while it does have features that aren’t desirable, it was the first consensus mechanism and the big bad bitcoin model still uses it. Keep watching to learn exactly what Proof of work is and why it’s still a leading model for the crypto community.

Consensus Mechanisms 

To understand what proof of work is, first we need to know what a consensus model is, and why it is needed.

In a normal database system that holds information, for example, medical report cards, a single person or computer is given the responsibility to manage the whole database. It is only their job to update, maintain, delete, and add new patient information to the database, nobody else has access to it. Technically, they could delete your account, or say that you owe them $10,000 at will.

For blockchains, this is completely different. Being what is called a “distributed ledger”, this technology is self-governing — which means there isn’t one person who can control it or make changes. Contributions come from all of the hundreds of thousands of users who participate in the network to make it function properly. If one person said you owe them $10,000, they would be quickly outed as a fraud by the rest of the people on the network. This is the first benefit of a consensus model. 

In an ever-changing system like the blockchain, you really need a reliable, fair, real-time, efficient, and transparent mechanism that will ensure that transactions that are executed are genuine and that there’s a consensus on the network. That was a lot of words, but if you are curious what consensus means, it means that everyone is on the same page. Essentially, if bob pays alice $10, we want to make sure everyone knows what happened and also that bobs account goes down $10 and alice’s goes up $10. Proof of work is one way to make sure everyone has the same database, that they reach “consensus”. 

In the blockchain, instead of one person having a record of those medical records, everyone participating has it – they have their own log of what is going on. This way the information is public and can’t be frauded. However, like I said earlier, you need a way to make sure everyone is on the same page. This “distributed ledger” is how we do that. Everyone has their own record, but how do we make sure everyone has the same record? 

Now that we have an idea of what a consensus mechanism is, let’s dive into proof of work, that solves that problem. 

What is Proof-of-Work (PoW) 

If you search the word on Google and other search engines, you’d be told it’s a consensus mechanism on the Bitcoin network. Yes, it is a consensus mechanism but there’s more to it. 

In technical terms, proof-of-work is an algorithm or system that uses a significant amount of effort to deter or eliminate fake uses of computing power. 

Launched on the Bitcoin network in 2009, proof-of-work was designed to solve the problem of “double spending” which if unchecked could be a major issue for crypto projects. What is double spending? Imagine Bob has $10. Basically, we wanted to make sure Bob didn’t pay Alice $10, and then go and pay Sally $10 as well, even when he didn’t have it. One of the jobs of proof-of-work is to ensure this doesn’t happen. 

While this is easier on a centralized system because of the central authority, (in other words, one person can check and make sure it didn’t happen by looking at their records) it is much harder and even trickier to solve this problem on a blockchain, where millions of people have their own records. Double spending on a network is bad, it makes duplicate coins, reduces the value of the coin, and basically makes the currency worthless and unpredictable. 

How PoW Works 

Bitcoin, like every other crypto project is blockchain-based. Being a decentralized ledger (and you can watch our video about decentralized finance if you’re curious what that means), this technology is tasked with the responsibility of storing information permanently and safely. As the name implies, blockchain comprises “blocks” which when verified are added to the network’s chain. Each of the blocks contains information of the recent transactions verified. 

Basically what a block is… is a list of transactions in a specific time period. For example one block might have Bob pays Alice $10, Alice pays Sally $5, and Alice pays Bob $5. A real block contains about 100 transactions, but you get the idea. This means you can go back and see EVERY transaction in the blockchain, because new blocks are directly tied to the previous block, which makes this a chain!

Miners, which are just people using their computers to participate in the network to add new blocks, execute proof-of-work each time a new block is added. It takes roughly ten minutes on the Bitcoin network for miners to find the winning PoW to validate transactions. 

You might be wondering what is actually happening when a bitcoin block gets “mined” or “validated”, well it is actually some really difficult guesswork. There are essentially a ton of computers guessing randomly until it hits that block’s “password” and then it is verified. The password can’t be predicted, but only guessed. You can check it very quickly though to make sure it’s right. This “randomly guessing” task is actually a hash function, and it’s very important to proof of work, but it’s also very technical and not completely needed here, so make sure to hit that like button and subscribe for future videos where we plan to explain it after covering more basic topics!

By figuring out this really difficult “password”, we can be sure that you spent a ton of time trying to guess and check it. This is where the “proof of work” comes in, you have proof that you spent a long time trying to find the password that works, and so you get a reward, which is a certain amount of bitcoin. The transactions in that block are then “validated” and the records of everyone on the network are updated. 

Features of the PoW Mechanism 

The Bitcoin and Ethereum networks consensus mechanism has a few stand-out features. 


The singular purpose of integrating this system into crypto projects is to offer a reliable, safe, permanent, fair, and transparent system that will form a consensus based on network participants’ contributions. 

Proof-of-work like any mechanism consensus is secure. Misbehavior from a miner on a proof-of-work mechanism may result in being cut off from attempting to add new blocks. Also, carrying an attack on this system would take a TON of money and computing power. To create fraudulent transactions, you would need to control 51% of the network’s power, which is equal to hundreds of billions of dollars in hardware today. Since it’s so expensive to make fake transactions, we can assume it’s safe and secure. 


Miners broadcast the details of a transaction when they add new blocks to the network. Once this broadcast is made, nodes leave what they are doing and double-check the transaction to ensure that the asset to be transferred has not been double-spent. Remember, consensus means everyone has the same records. 

These miners have to compete with thousands of others to earn rewards in the form of Bitcoin. The healthy competition gives birth to what is called a consensus mechanism (proof-of-work), which then syncs all of these nodes to the same blockchain copy once a new block is added. Once one person solves the block’s puzzle, they get a reward and then give the solution to everyone else to add to their ledger and so they can start working on the next solution. 

Potential Problems with Proof-of-Work 

Inherently flawed, proof-of-work has a ton of problems that have made it almost impossible for mass adoption. 

Impact on the environment 

According to a 2019 BBC news article, proof-of-work is estimated to have used as much energy as all of Switzerland. That’s not all, as the network continues to grow and more people begin to jump on the Bitcoin frenzy, the energy usage increases. 

The energy consumption level of this network makes it bad for the environment. However, there are reports a large majority of miners are starting to use renewable energy such as solar panels to power their mining operations. 

Inability to scale 

The crypto market growing at an unprecedented rate has opened up opportunities for individuals to make real money either as traders or miners on these networks. With a 24-hour trading volume of around $50 billion, the market is booming. 

Remember, one block is solved around every 10 minutes, and these blocks have a transaction limit, so at peak times, the fee to send money over a proof-of-work blockchain can be high. 

No Penalties 

The proof-of-work consensus acts as a central authority or sole administrator on blockchain networks. A traditional authority or administrator tasked with managing a database will have strict penalties to be meted out to individuals with malicious intent. 

Unfortunately, this consensus mechanism does not have them. 

Aside from increasing the cost of attempting to add blocks to the chain or preventing them from attempting new blocks, miners with malicious intent are not severely punished, this gives room for further misconduct. Proof of Stake, however, does have a penalty for malicious attempts to create fake transactions. 

PoW Powered Projects 

Aside from being the sole mechanism on the Bitcoin and Ethereum networks, proof-of-work powers a couple of other networks; 

  • Litecoin 
  • Monero 
  • Bitcoin Cash 
  • Dash 
  • Zcash, etc. 
  • Conclusion 

    Consensus mechanisms have proven to be quite helpful when it comes to maintaining the peace of crypto networks and eliminating double-spending, a huge problem capable of reducing the network’s market value. 

    Proof-of-work like other mechanisms is tasked with that responsibility. While it has managed to achieve that effortlessly in the past, there’s growing concern about its inability to scale efficiently. 

    This piece has discussed in full what this mechanism is, how it works, its problems, and how it currently impacts the Ethereum blockchain. 

    About the author 


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