Proof of Work (PoW) Explained

By Aleksandra Wilson
3 min read September 22, 2021

What is Proof of Work?

Proof of Work, also known as PoW, is the consensus mechanism to secure the network by using an algorithm. That, while also creating new blocks and issuing coins as compensation. In simple terms, miners try to solve really complex mathematical equations through a process that is energy-intensive. The goal is to create blocks and to receive Bitcoin rewards in return. The technology of the blockchain in charge of powering Bitcoin, just as many other cryptos, is simply a decentralized database. It is driven by nodes that are distributed all over the globe; there are no authorities to supervise, call the shots, or establish the rules. 

Then, how is it possible for everyone to agree on the substance of the ledger? Well, that’s when the proof of work consensus algorithm plays its part. It secures the ledger and the network from attacks of “double-spend,” simultaneously, it adds blocks of transactions to the chain while it generates rewards. This kind of mechanism needs the miners to compete in solving complicated math equations using their equipment. It’s a highly complex process, it’s meant to be that way, but the results, the rewards are potentially precious.

The Environmental Impact

Proof of work is needed in order to keep Bitcoin’s operation going. The consumption of energy required has suffered great scrutiny, and that’s the reason why other cryptos have chosen the proof of stake mechanism instead. We can compare the carbon footprint of Bitcoin to the one of whole Morocco. Tesla, the carmaker, pointed out the problem when it decided that it wouldn’t take Bitcoin payments anymore. They made this public in May 2021, claiming that the impact of mining was too significant, and they didn’t want to take part in it. Constantly, BTC supporters claim that the estimates of the use of energy mentioned frequently are misleading. 

PoW or PoS?

Another mechanism that has taken a stronghold in the industry of blockchain is proof of stake. It all started from the concerns of finding a new way around the elevated consumption of energy than proof of work generates. The proof of stake system is based on validators to hold a big amount of crypto in the network and for them to validate transactions while earning rewards. Some other coins also use the PoS model, such as Algorand, Binance Coin, Cosmos, and Cardano. Soon, Ethereum will be transitioning to the same when the Ethereum 2.0 upgrade gets wholly implemented. This improvement will significantly reduce the amount of energy consumption; experts estimate that it will be reduced up to 99.95%.

Since PoS doesn’t need sophisticated high-powered equipment for mining, reducing said consumption is possible. Although, some claim that this model will only help rich people get richer because validators have to take an enormous amount of coins to participate. At the same time, this encourages users to hold on to their coins instead of spending them.

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