One of the original goals of cryptocurrencies was decentralization, and the first solution was known as proof of work. To achieve it, there had to be a method for verifying transactions that did not require banks.

A proof-of-work (PoW) protocol adds new blocks of transactions to a cryptocurrency’s blockchain. The effort, in this case, is producing a hash (a long string of characters) that matches the current block’s target hash. The miner who creates this block has the right to append it to the blockchain and receive compensation.

The first cryptocurrency, Bitcoin (CCC:BTC-USD), used proof of work as its consensus mechanism. It’s well-known for its security and inefficiency but has a considerable environmental cost.

You’ll have a better knowledge of the coins that utilize proof of work if you comprehend it. This can also assist you in determining where to put your money when investing in crypto. Continue reading for a thorough explanation of proof of work.

How the proof-of-work model works

The proof-of-work method is a consensus technique for verifying and recording cryptocurrency transactions.

Every cryptocurrency has its blockchain, a public ledger containing blocks of transactions. Each block of transactions in a proof-of-work cryptocurrency has a unique hash. To be validated, a crypto miner must generate a target hash that is less than or equal to the block’s.

Miners use mining equipment to compute computations to solve complex mathematical problems quickly. The goal is to be the first miner to discover the sought-after hash since that miner will be able to update the blockchain and receive crypto prizes.

The advantage of Bitcoin’s proof of work system is that finding the target hash is difficult, but verifying it isn’t. The procedure is tough enough to avoid tampering with transaction logs. Concurrently, once a target hash has been discovered, it becomes simple for other miners to verify it.

Example of PoW

This is an example of how Bitcoin’s proof of work system protects the blockchain’s integrity.

The verification procedure for Bitcoin transactions begins with a security check. A block forms when a Bitcoin transaction goes through a security check, and the proof-of-work algorithm produces a hash for the block. Bitcoin uses the algorithm SHA-256 to generate hashes, and it always creates hashes with 64 characters in length.

Miners compete to be the first to generate a target hash less than the block hash. The winner is allowed to add the most recent block of transactions to Bitcoin’s blockchain and receive Bitcoin rewards in the form of freshly minted coins and transaction fees. Miners will continue to get transaction fees for their service after there are 21 million Bitcoins in circulation.

Bitcoin’s PoW mechanism, like other cryptocurrencies, is designed to produce a brand new block every 10 minutes. To accomplish this, the Bitcoin mining adjusts the difficulty based on how quickly miners create blocks. If mining activity becomes rapid, the hash computations become more complex. They become more difficult if they are moving too slowly.

Proof of work vs. proof of stake

The first cryptocurrency consensus mechanism has a basis in proof of work. In 2012, Peercoin (CCC:PPC-USD) introduced an alternative known as proof of stake. According to the network, the mechanism chooses transaction validators according to how many coins they’ve staked or locked up.

Staking is more scalable because it does not require as much computing power as PoW. As a result, it can handle transactions faster and use less money while using less energy, making proof-of-stake currencies more environmentally friendly. Staking crypto requires no expensive equipment, and as a result is also far more accessible to start up than mining.

However, PoW has a long track record regarding security. One disadvantage of proof of stake is that big cryptocurrency holders might have too much influence, an issue that proof of work does not face.

Advantages and disadvantages of proof of work

Here are the main advantages and disadvantages of proof of work:


  • The level of security is high.
  • It is a decentralized way of verifying transactions.
  • Miners earn crypto rewards.


  • Inefficient transaction speeds are slow, and fees are high.
  • Energy usage is high.
  • Mining often needs expensive equipment.

PoW coins

The following are just a few of the well-known cryptocurrencies that employ proof of work:

  • Bitcoin was the first cryptocurrency since its inception in 2009. It was the first to introduce the PoW in cryptocurrencies.   Many other coins would adopt it later.
  • Litecoin (CCC:LTC-USD) is one of the first altcoins, or alternatives to Bitcoin, introduced in 2011. It was developed using Bitcoin’s source material. Litecoin offers faster transaction speeds than Bitcoin.
  • Dogecoin (CCC:DOGE-USD) is a cryptocurrency based on the Doge meme introduced in 2013. Despite beginning as a joke, it would develop a devoted following.

The proof of work system was the most popular method for early cryptocurrencies. PoW solved the problem of transaction processing security and decentralization. Although PoS has since grown in popularity, many major coins continue to use proof of work.

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