Written by Shivashish Yadav on   -  10 min read

What is Proof Of Work? How does it work in Blockchain? Explained.


Everybody wants to invest in it because of the increasing trend of Cryptocurrency. If you are also wanting to invest in it, then along with the basic information of Cryptocurrency, you should also know that how do Cryptocurrency works? So today we will know what is Proof of Work, and how does Proof of Work? So read this article completely for more information.

Why Proof of Work was needed?

The PoW system was created so that it can be protected from hackers, if someone has to hack this system, then it will be a much more powerful computer, which will require a lot of money and time, due to which any attack on the PoW system. Will think ten times.

As the process of transactions continues, new blocks are added to the blockchain, due to which the blockchain keeps getting stronger. The more blocks in a blockchain, the more difficult it becomes to attack.

And if the block is weak, there will be fewer users of that network and cryptocurrency, due to which there will not be many transactions on it. Here, it becomes much easier to hack such networks and cryptocurrency.

Just as it is very easy to break one stick by hand but it is impossible to break many sticks at once.

When and why did Proof of Work start?

If we talk about the beginning of Proof of Work, then first of all it was used by Bitcoin in 2009. Since then till now, Bitcoin works only on Proof of Work. Meaning that all its transactions are done through Proof of Work.

And now it is the turn why it was used. Then we tell you that PoW was brought into view of the dangers like hacking. Minors in PoW have powerful computers, and minors have an enormous group.

Therefore, if someone wants to hack this system, then he will need powerful computers, even from minors.

And this process is very expensive and also complicated.

In Blockchain Technology, a block of transactions continues to be formed according to each set time. And because of the ever-increasing number of transactions, new blocks keep getting added to each other. The more blocks that are made, the more difficult it will become to hack.

That is why the transaction on any cryptocurrency has the most impact on being powerful and secure.

What is Proof of Work?

If we understand Proof of Work in easy language, then it is a process in which Cryptocurrency is sent by one person to another person or says that the Crypto transaction is verified by Minors. After that, this transaction is completed. And the minor who verifies this transaction first gets the reward, and he is given the same cryptocurrency in the reward which he is mining. For example, if a minor verifies the transactions of Bitcoin and Ethereum, then he gets bitcoin or Ethereum only in reward. And along with this, the transaction fees which are paid by the traders are also available to the minors, because it requires their hard work with the computers of enormous processors and their money, time, and electricity.

How do Cryptocurrency Transactions get Validated?

To verify this transaction, there is competition among all the minors who are connected to the network, that first one has to solve a computing mathematical puzzle. Whoever solves that puzzle first. After that, this transaction is validated. And the one who solves the Computing Puzzle first gets that same minor in Cryptocurrency Reward.

With this, these minors do a thorough check of that transaction and see if there has been any mistake in it or if any spam has been done by anyone. After verification of these things, minors validate that transaction. In this entire process, the same minors who have eminent power computer systems win more. And they also earn more than Crypto.

Understanding Proof of Work

This explanation will focus on proof of work as it works in the bitcoin network. Bitcoin is a digital currency that is a type of distributed ledger known as a “blockchain”. This ledger records all bitcoin transactions, arranged in successive "blocks" so that no user is allowed to spend twice as much of their holdings. To prevent tampering, the ledger is public, or "distributed". An altered version will be immediately rejected by other users.

The way users detect tampering with user behavior is through hashes, long strings of numbers that serve as proof of work. What is Proof of Work? Put a set of data through a hash function (bitcoin uses SHA-256), and it will generate only one hash.

Because of the "avalanche effect," however, even a minor change in any part of the original data will cause a perfectly recognizable hash. Whatever the size of the original data set, the hash generated by a function will have the same length. A hash is a one-way function: it cannot be used to get the original data, only to check that the data generated by the hash matches the original data.

Generating hash

Generating any hash for a set of bitcoin transactions would be trivial for a modern computer, so in order to "work" the process, the bitcoin network "difficult" a certain level of difficulty. Determines the level. This setting is adjusted so that a new block is “mined”–approximately every 10 minutes a valid hash is generated and added to the blockchain.

The difficulty is accomplished by setting a "target" for a hash: the smaller the target, the smaller the set of valid hashes, and the more difficult it is to generate. This means a hash that begins with an endless string of zeros. Proof of work was initially created as a proposed solution to the growing problem of spam email.

Acceptable proof of work

Since a set of data sets can only generate one hash, how do miners make sure they generate a hash below the target? They replace the input e by adding an integer, which is called a nonce ("number used once"). Once a valid hash is found, it is broadcast over the network, and the block is added to the blockchain.

Mining miners is a competitive process, but it is more of a lottery than a race. On average, every ten minutes someone will generate an acceptable proof of work, but who that will be is not known to anyone. Miners pool miners together to increase the chances of mined blocks, which generate transaction fees and, for a limited time, reward newly created bitcoins.

Proof of work makes it extremely difficult to change any aspect of the blockchain. A change would require all subsequent blocks to be mined again. It also makes it difficult for a user or pool of users to monopolize the computing power of the network, as the machinery and power required to perform the hash function are expensive. If the mining network part of the mining network accepts alternative proof of work, it is known as a hard fork.

Example of proof of work

Proof of work for this to happen requires the computer to randomly engage in hashing functions until it arrives at the output with the correct minimum amount of leading zeros. The hash for block #429818, mined on September 14, 2016, for example, is 000000000000000004dd8d78ff2e8d. The block reward for that successful hash was 10 BTC. That block will always contain 2,012 transactions involving over 1,000 bitcoin, as well as the header of the previous block. If someone tried to change the transaction amount to even 0.000001 bitcoin, the resulting hash would be unrecognizable, and the network would reject the fraud attempt.

Disadvantages of Proof of Work

Minors who work in PoW require Super Computer System. And these computers require a lot of electricity. For this reason, Bitcoin minors spend as much electricity in 1 year as countries like UAE spend in an entire year. Currently, if seen, most of the mining of bitcoin has been done, due to which the rewards of the minors are decreasing, which is a loss deal for the minors. The biggest disadvantage of PoW is that only one minor gets the reward in it, who will solve the computing puzzle first. Due to which both money and time of other minors are wasted. One disadvantage of PoW is that if over 51% of the control in Small Blockchain or any other Cryptocurrency goes to a minor, then he can change it according to his own and take complete control. And can become the owner of the entire network. PoW is also considered very harmful to the environment, because of the excessive energy used in its mining.

51% Attack

The biggest threat to the PoW system is a 51% attack. In this 51% attack, if the miner has 51% mining power of the entire network, then he can easily attack the entire network by controlling it, whatever the network is. The transaction is happening, he can change it.

A similar attack took place on Verge Cryptocurrency. This cryptocurrency also works in PoW. The miner had over 51% mining power on this cryptocurrency, due to which the miner attacked its network and took about 35 million coins.

Why Ethereum is leaving the POW system and adopting the POS system

Scaling in PoW, i.e. if some major changes have to be made in it, then there is a problem in making those changes and the disadvantages of PoW which I have told you so far are the main reason Ethereum is adopting POS system except PoW.

In Ethereum on PoW, only 15 transactions can be done in a second and after the same Ethereum comes to PoS, more than 1 lakh transactions can be done in a second.

Proof of Work FAQs

What does Proof of Work mean?

PoW requires nodes on a network to prove that they spend computational power (i.e. work) in a decentralized manner to achieve consensus and to prevent poor actors from overtaking the network Is.

How does Proof of Work Validate a Crypto Transaction?

The work itself is arbitrary. For bitcoin, this includes iterations of the SHA-256 hashing algorithm. The "winner" of one round of hashing, however, collects and records transactions from the mem pool to the next block. Because the “winner” is randomly chosen in proportion to the work done, it encourages everyone on the network to act conscientiously and record only true transactions.

Why does Cryptocurrency need Proof of Work?

Because they are decentralized and peer-to-peer by design, cryptocurrency networks such as blockchains require some way of achieving both consensus and security. Proof of work is a method that makes it too resource-intensive to overtake the network. Other proof-of-stake mechanisms also exist that are less resource intensive but have other drawbacks or flaws, such as proof of stake (PoS) (PoS) and proof of burn. Without a proof mechanism, the network and the data stored within it will be vulnerable to attack or theft.

Does bitcoin use Proof of Work?

Yes. It uses a PoW algorithm based on the SHA-256 hashing function to validate and confirm transactions and issue new bitcoins in circulation.

How is Proof of Stake (POS) different from PoW?

POS is a consensus mechanism that randomly assigns a node which node will minimize or validate block transactions according to how many coins the node has. The more tokens a wallet has, the more mining power is effectively given to it. While POS is much less resource intensive, it has several other drawbacks, including a higher 51% attack probability in smaller altcoins and incentives to accumulate and not use tokenized altcoins and incentives.