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What is proof of work?

Proof of Work (PoW) underpins the Bitcoin network and many other cryptos based on the same model of mining. But how exactly does it work?

Think of what is involved in mining and refining gold. The ore has to be dug up and processed, the gold melted, cast into coins and ingots, and so on… in all, a lot of energy and a lot of specialist machinery is required. The existence of the Krugerrand, a gold coin from South Africa which has known and provable purity, is evidence of this process.

This is the analogy Satoshi had in mind when he articulated the concept of Bitcoin mining. In the cryptocurrency mining world, PoW coins are issued upon proof that computational work has been carried out.

The general idea is to make it very difficult – very energy intensive and time consuming – to update the Bitcoin ledger. That way, there will be a high cost to attempting to do so. At the same time, it is very easy to check the accuracy and validity of the ledger. (You can read more about this in our articles on Bitcoin and Blockchain.)

How does it actually work?

In simplified form, Proof-of-Work requires that computers carry out a particular type of computationally expensive operation in the search for a number that satisfies certain conditions. The inputs to this ‘puzzle’ include the history of the blockchain to date, while the output has to be a value that starts with a certain number of zeroes. It’s like a search for a needle in a haystack, and the nature of the puzzle is that it has to be done by random guesswork – trying a value, carrying out the computation and checking to see if the answer fits the criteria. In all, trillions of these operations are conducted every second as the network’s miners compete to be the next winner and gain the new bitcoins that are created with every block added to the blockchain.

This is why the Bitcoin blockchain is so secure. It is extremely costly to add a new block of transactions to it because of the intensive computational work needed to do so. If you try to add a fraudulent transaction, it can easily be discovered and you will have wasted that expensive effort. It’s much better to do what everyone else is doing, and maintain the ledger accurately.

Proof of Work gets some bad press due to its energy requirements, which are massive. But it’s an ingenious way of ensuring the integrity of a shared ledger without requiring a central party to keep accounts.


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