A Beginner’s Guide to Proof of Work (PoW)

If you want to learn about blockchain and how it works, you must understand the proof of work consensus algorithm. Investors and blockchain enthusiasts need to learn about the sustainable implementation of PoW before they can move forward in this field.

The key benefit of the proof of work algorithm is that it helps safeguard a cryptocurrency against double-spending in 51% attack.

Lots of cryptocurrencies, including Bitcoin and Ethereum, are using the PoW mechanism to confirm new transactions and add them to the blockchain to create new blocks, and hence new cryptocurrencies are to be rewarded to the miners.

Miners invest in blockchain technology with the help of their mining rigs and compete with one another to complete transaction processing on a specific blockchain to get rewarded for their efforts.

In this guide, we’ll learn the key concept behind the PoW consensus algorithm and how it securely works to keep the blockchain system foolproof. We will learn about the problems miners solve and why these mathematical problems are so important for the sustainability of the blockchain market.

You will understand why a lot of cryptocurrencies are still using the inefficient PoW system and why Ethereum 2.0 is focusing on the PoS system.

Introduction to Proof Of Work

Proof of work was first used by Bitcoin, the first cryptocurrency to ever exist. It is, therefore, the oldest consensus mechanism and is still used by a majority of cryptocurrencies. There are a bunch of reasons why proof of work is the most popular consensus algorithm.

One of the main reasons why it is so popular is that it promotes fairness and decentralization in the decentralized blockchain ecosystem. While there are a few other competitors in the market, proof of work still works like a wonder and is still very effective.

PoW achieves a good rating on the BFT (Byzantine Fault Tolerance) scale. This system is developed to prevent the nodes on a blockchain from going against the common consensus to modify the values.

With the help of BFT features, blockchains can securely allow their nodes to validate transactions and add new blocks to the chain by continuously solving mathematical puzzles, and this keeps them away from manipulating the data being added to the blockchain after consensus.

The first node to propose a successful solution to the mathematical puzzles gets permission to add a new block to the blockchain. After the block has been added to the chain, the successful node gets rewarded by the blockchain for its efforts. For example, for nodes working within the Ethereum network, ETH tokens are used as the reward.

Another key purpose of the PoW consensus mechanism is to promote a closed economy structure within every blockchain. This promotes self-sustainability amongst every blockchain using the PoW consensus mechanism.

Proof of Work Solves Mathematical Problems

PoW includes nodes trying to solve complex mathematical problems to add new blocks to the blockchain and win the reward. However, since these mathematical problems are very complex, they require a lot of computational power from the miner’s computer.

While the problems can differ in their complexity, they always require a lot of hash rate from the mining rig.

In hash functions, the miner’s rig is required to generate a random number, or hash, of a specified length. The first miner to guess the random number gets permission to add a new block on the blockchain by verifying the transactions.

In integer factorization, a larger number needs to be broken down into smaller numbers, and prime numbers are used by miners while remaining under certain restrictions.

Using the PoW protocol keeps the blockchain safe from DoS attacks by enabling the use of complex mathematical puzzles. The method works on finding the root cause of the issue and resolves it before a hacker can exploit the network.

Since a miner needs to put a lot of effort into validating the transactions and adding the blocks on a blockchain, they’re rewarded for their efforts. However, as a network starts to grow rapidly, the scalability and security of the network become a great challenge.

The increasing complexity of a large network also increases the hash rate required to solve mathematical puzzles. This is the main reason behind the introduction of the PoS (Proof of Stake) consensus mechanism, which is far more energy-efficient and scalability friendly as compared to PoW.

Who Founded PoW Consensus Model?

Since Bitcoin relies on the PoW mechanism to work properly, Proof of Work had to be invented before the invention of Bitcoin. The algorithm dates back to 1993 when it was published as the perfect way to deter DoS attacks by Cynthia Dwork and Moni Naor in one of their articles. The algorithm was marketed as a perfect way to prevent DoS attacks and to ensure security, sustainability, and scalability in the long run.

Before its use by Nakamoto in the creation of Bitcoin, PoW was used by a computer scientist named Hal Finney, who introduced the concept of RPoW (Reusable Proof of Work) in 2004. RPoW worked by receiving a non-fungible token as a PoW input and outputted a specific token that could be traded between people.

Proof of Work was also used in other applications. For example, it was used in Adam Back’s HashCash; the system requires the sender to perform mathematical tasks before sending any email, thus keeping the receivers safe from spammy emails.

In the proof of work consensus mechanism, nodes are permitted by the network to verify transactions and add new blocks to the blockchain. The system that chooses validators works like a lottery.

The odds of a validator getting chosen directly correspond to their hash rate. There are mines in the PoW system, and then there are full node operators.

Miners participate in the mining process by solving mathematical puzzles and winning the right to validate transactions and add new blocks to the blockchain network.

Every problem provided by the network needs to be solved by miners to win the rewards. Once a block has been created by a node, PoW makes it easy for other nodes to verify the transactions.

To validate new transactions and combine them to create new blocks on the blockchain, nodes need to do a lot of work. This is why a lot of electricity is used in the process of mining and generating new blocks on the blockchains using the PoW mechanism.

The excessive use of electricity in this process causes lots of environmental issues. The mechanism is used to verify new transactions and validate new blocks before they are added to the blockchain. As a reward for participating in this process, the miners and nodes are provided with rewards in the form of cryptocurrency tokens.

Node operators or validators are the ultimate parties that validate new blocks on a blockchain. Whenever a node tries to add an invalid transaction to a block, the node validator can easily reject the transaction to maintain consensus between the nodes.

The average time it takes for a node validator to add transactions to a blockchain is around an hour. This is true for the PoW consensus mechanism.

Proof of Work Security

As we’ve already mentioned above, the PoW mechanism is still capable of withstanding BFT, and that’s why it is still a safe and secure mechanism. The method of operation in the case of PoW is also very secure and enhances its security even further.

The hash of the first block continues into the second block, and this keeps happening for every block added to the blockchain to keep the sequence of blocks intact and to prevent the violation of blocks. This summarizes the security of the PoW mechanism.

To start creating a new block, miners need to use the hash from the previous block as the founding hash of the new block. This triggers a chain reaction in which every block needs to be recreated by the miner before they can proceed to the next block. This prevents the blockchain from ever getting tempered.

Pros and Cons of Proof of Work

Let’s discuss some of the most significant benefits and drawbacks of the proof of work (PoW) consensus algorithm.


PoW keeps a network safe from DDoS attacks by making them less effective and rewarding for the attacker.

The algorithm includes the contribution of the members of a blockchain toward the network’s maintenance.

Since PoW works towards maintaining a distributed public ledger, it keeps everything fair and the whole mining and transaction-related operations transparent.

Since the miners hold a small portion of the cryptocurrency they’re mining, their access to the key features is limited by the PoW algorithm.


Because the PoW algorithm is very power intensive, it uses lots of electricity in the form of mining operations around the globe. Moreover, as more miners are joining the mining industry with every passing day, the use of electricity is expected to increase even further.

The probability of 51% attacks is minimal but is still there. If a node manages to take control of the 51% hash rate of Bitcoin, it can affect the blockchain significantly and even block new transactions or double-spend the coins.

Although the PoW algorithm is designed to decentralize the process of cryptocurrency generation, it is still very centralized. For example, about 50% of all bitcoin mining is controlled by the top three mining pools. While quick developments are being made to resolve this issue, it is still far from being eliminated.

The equipment used in this algorithm is very expensive. For example, GPUs and mining rigs are becoming hard to find and more expensive with every passing day.

The complex mathematical puzzles have nothing to do with the features of the PoW algorithm and are only helpful in validating and adding new blocks to the blockchain.

Since PoW favors the miners/ mining pools with more hash rate, it actually promotes centralization as opposed to decentralization in the case of blockchain security and transparency.

As the rewards of mining continue to decrease and mining becomes tougher, miners will slowly fade away.

Top Proof of Work Coins

While the most popular coin using the PoW algorithm is Bitcoin, many other cryptocurrencies are doing the same as well. However, Bitcoin goes through a halving process every few years. Halving effectively halves the rewards of the mining process for miners. This is making it tough for miners to keep mining Bitcoin.

Miners are now looking for alternatives to Bitcoin when it comes to mining through the PoW algorithm. Let’s consider a few more cryptocurrencies that use the PoW algorithm in their operations.

Ethereum Classic

While the Ethereum 2.0 update focuses on using the PoS algorithm, Ethereum Classic still uses PoW for its operations. Because of the use of the PoW algorithm, ETC is also vulnerable to 51% of attacks. This increases the chances of double coin spending.


Litecoin also uses PoW to add new blocks to the blockchain. With the help of network data removal, the block size can also be increased. As the name suggests, Litecoin supports way faster transactions as compared to Bitcoin and charges way fewer gas fees as well.


ZCash provides a high level of anonymity to ensure the privacy of its investors. The coin even uses the SHA-256 hash function, which is the same hash function used by Bitcoin.


Monero also uses the PoW algorithm, just like many other altcoins. The key features of Monero are its transparency, fungibility, privacy, and complete decentralization with the help of the public ledger being used by the cryptocurrency.


DASH is seen as a reliable cryptocurrency for faster and private transactions. Fast Transactions provide miners with the best incentive to invest in DASH.

Bitcoin Cash

Bitcoin Cash is an exact copy of the original Bitcoin. While the cryptocurrency uses PoW, it is vulnerable to 51% attacks, just like Bitcoin itself.

PoW vs. PoS: Which One Is Better?

In recent years, many experts and cryptocurrency enthusiasts have started to praise the PoS consensus algorithm over PoW. There are many factors that make the experts believe that PoS is better than PoW.

Let’s take a look at the most significant factors which affect the PoW algorithm and give PoS a lead over this old and ineffective mechanism.

Many critics of the cryptocurrency market mention that the PoW algorithm uses a lot of electricity to be fully functional. Proof of work algorithm requires the use of a lot of hash rate, which complicates the process, and requires the mining rigs and computers to utilize heavy amounts of electricity.

Bitcoin alone uses more electricity than whole countries, and this excludes every other altcoin, including Ethereum.

On the other hand, the energy costs of cryptocurrencies using PoS are thousands of times lesser as compared to the ones using PoW. That’s why the miners working under the PoW algorithm have to spend lots of money on energy and thus can’t enjoy a good profit margin.

Moreover, since the electricity costs are very high in the PoW system, they cannot easily scale their transaction limits, and the gas fees are also very high. Even if the block sizes are reduced by the developers, this will lead to a temporary fix and will ultimately decrease the decentralization factor of these blockchains.

On the other hand, the proof of stake consensus algorithm uses randomly selected nodes to verify the transactions and create new blocks with the help of stakes offered by investors. This way, the energy cost is minimized to a negligible extent, and the transaction limit is also increased.

In the proof of work consensus algorithm, the system allows the miners to work against each other to solve complex mathematical puzzles and add new blocks to the blockchain. Every miner has to follow the consensus rules by themselves and confirm each block without tampering with it.

The risk of majority attacks in the PoW systems is very high. These attacks can be easily made by anyone who possesses more than 50% of the mining power of a cryptocurrency. They gain so much power that they can stop transactions from getting verified on the blockchain and cause double spending of coins to benefit themselves.

On the other hand, PoS only allows those investors to take part in the mining process who have stakes in the network. This way, no attacker would have the guts to even try validating a fake transaction since it would cause them to lose their stake in the network.


Proof of work is the most used consensus algorithm in the crypto marketplace. However, it has its issues, like slow transactions, high transaction costs, and huge energy consumption.

That’s why the Proof of Stake algorithm is being used as an alternative to PoW, as it provides faster transactions with minimum gas fees.