What Does Proof of Work (PoW) Mean in Crypto

In order for cryptocurrencies like Bitcoin to function, they rely on a distributed consensus system called proof of work.

Most people immediately associate blockchain with digital currencies when they hear the term. There is more to digital currencies than only the blockchain technology on which Bitcoin and others are founded.

One of the foundational ideas behind cryptocurrencies is proof of work or PoW. It’s the underlying technology that enables cryptocurrencies like Bitcoin and Litecoin to exist.

In this article, we’ll discuss proof-of-work (PoW) and how it compares to other popular consensus methods.

What Is Proof of Work? How Does PoW Work?

A blockchain network’s ability to reach a decentralized consensus on the legitimacy of transactions is made possible through a technology known as proof of work (PoW).

Bitcoin’s pseudonymous developer, Satoshi Nakamoto, first advocated proof of work in the Bitcoin whitepaper, saying:

“We propose a solution to the double-spending problem using a peer-to-peer network. The network timestamps transactions by hashing them into an ongoing chain of hash-based proof-of-work, forming a record that cannot be changed without redoing the proof-of-work.”

For digital currencies, double spending is a problem because copies can be generated and spent twice. The solution is proof of work, which protects blockchains from being tampered with or attacked by preventing the double spending of digital currencies.

Transactions conducted on the blockchain and the creation of new blocks in the blockchain are both confirmed through the use of proof of work. For a network to function, it needs specialized nodes called miners to process and validate transactions in a competitive environment.

The proof-of-work algorithm determines the mining difficulty and the amount of work that must be done by each miner. The “job” of mining cryptocurrencies is to verify their validity before adding them to the chain.

When expanding a crypto network, adding new blocks requires proof of work. Transaction processing is done in blocks in proof-of-work cryptocurrencies. There are three pieces of information in every single block: the block difficulty, the hash function, and the nonce. 

Since the hash encodes information about a block, it is intrinsically linked to the process of proving that work has been done on the block.

The proof-of-work method requires miners to complete tasks that are incredibly tough in order to determine who will be awarded the ability to add a new block to the blockchain. This technique is used to ensure that only valid transactions are added to the network. 

Simply put, the “work” and “proof” of the claim are the results of solving the mathematical problem.

For the purpose of solving the problem and earning the privilege of verifying the next block of cryptocurrency transactions, miners use specialized mining hardware to conduct the necessary computations.

In the process of computing, miners generate a ‘hash’ that transforms the data into a random string of characters. In order to earn cryptocurrency, miners must generate a hash that coincides with the current target nonce.

The first to complete the task is awarded the privilege of processing the transaction batch, adding a new block to the blockchain, and mining new digital currency.

How Safe Is Proof of Work?

The purpose of proof-of-work is to ensure the safety of crypto networks. PoW networks incentivize miners by having the nodes with the most computational power create the longest chain, often known as the “heaviest chain.”

Keep in mind that blockchains require a trusted central authority. This means that a minority of miners have little reason to initiate their own chain.

As most computations have been spent on the longest chain, it is deemed the most valid in a Proof-of-Work system. With everything in place, erasing or manipulating a transaction becomes extremely difficult, if not impossible.

Why Does Crypto Need Proof of Work?

Double spending can be avoided with the help of proof-of-work systems. Digital currencies would be rendered useless if their holders could spend their tokens more than once.

PoW, as we’ve seen, is crucial for ensuring the integrity of the network and ensuring that only legitimate blocks are added. Proof of work is what motivates miners to locate new blocks to protect the blockchain, which is how new cryptocurrency is introduced into a network.

The current reward for adding a block to the Bitcoin network is 6.25 BTC. Additionally, when a block is successfully mined into the Ethereum blockchain, the miner receives two newly minted ETH in addition to the transaction fees included in the block.

Difference Between Proof of Work and Proof of Stake

Some of the more recent blockchain networks use a consensus process called proof of stake (PoS). Here is a contrast between PoW and PoS:


In Proof-of-Work (PoW), miners compete with one another in order to verify blocks. Whoever figures out the solution first gets the block and the prize.

However, under PoS, validators in the network are chosen to check blocks by an algorithm based on the amount of cryptocurrency they own (stakes). As a result of the users’ efforts, they will be awarded in cryptocurrency.


When it comes to PoW, the emphasis is on processing speed to resolve the PoW problem and ensure the network’s safety. To ensure security and incentivize validators, Proof-of-Stake (PoS) systems rely on staked crypto.


With PoW, you can still participate in the system by providing your processing power regardless of your cryptocurrency balance. To take part in staking in PoS, you’ll need to have some cryptocurrency on hand.


In PoW, a transaction is considered genuine only if it is accepted by a majority of network nodes. Two-thirds consensus among validators is required at certain times in Proof-of-Stake systems before a block’s state is considered final.

Proof of Work Pros and Cons

The proof-of-work system is a revolutionary breakthrough that has proved crucial to the growth of Bitcoin and other cryptocurrencies. There are advantages to PoW, but it also has certain disadvantages.


  • For each new block of crypto transactions that can be successfully validated, miners can earn cryptocurrencies.
  • The ability to participate and get block rewards does not require any prior knowledge or possession of cryptocurrency.
  • PoW coins are secure because manipulating the network requires more than 50 percent of the blockchain’s computational power.


  • The cost of mining increases due to proof-of-work protocols since miners need to employ specialized mining hardware just to stay in the game.
  • In light of the rising computational demands, mining may become increasingly centralized within a few large mining farms.
  • Environmentalists have voiced worry over the excessive energy use of proof-of-work networks.

Final Verdict

To ensure a safe, decentralized method of processing transactions, early cryptocurrencies relied on proof of work as their consensus mechanism of choice.

Despite the fact that proof of stake has subsequently evolved as an option that uses significantly less energy, proof of work is still utilized by several large cryptocurrencies.

When considering safety, proof of work has more solid evidence behind it. Proof of work does not have the issue of parties with significant crypto holdings having too much control, which is one of the potential problems with proof of stake.