Proof of Work (POW)

4 min readMar 4, 2022


The original vision for cryptocurrencies like Bitcoin and Ethereum was decentralisation. To accomplish this, there was a need to confirm transactions without involving financial institutions. Thus creating a solution called the Proof of Work consensus model. First, we need to understand what a Consensus model is and why we need it.

In the normal world of web 2.0, centralised databases hold and store our information such as your Tax returns or your Medical report. One authority is paid to store, update, maintain and delete all this information and this can be very dangerous. For blockchains, this works completely opposite from this model because as a distributed ledger, the system should always be self-governing, meaning there is no one person who can control it or make changes. Contributions come from hundreds and thousands of users who contribute to the blockchain.

In this distributed system, we, therefore, need a reliable, fair, real-time, efficient, transparent mechanism that will ensure that transactions are executed and are genuine. Proof of Work consensus model ensures that everyone has the same databases and they reach a consensus and agree that the data on the blockchain is not fraudulent.

Thus, Proof Of Work is an algorithm or system that uses a significant amount of energy to deter or eliminate fake uses of computing power. This was designed to solve the problem of “double spending” by introducing a 3 entry ledger system. When I pay you 200 Pesos, I cannot go and pay another person 200 Pesos because I do not have them, in digital currencies, One can execute the same transaction 5 times, trying to pay the same money to two different people. Proof Of work eliminates this since we have no central authority to check whether you actually have the 200 pesos that you are trying to spend.

How Proof Of Work Works;

Introduced on the Bitcoin blockchain, POW is tasked with solving a hard mathematical equation so that it can be verified to add blocks to the bitcoin blockchain permanently and safely. Lists of transactions that have happened over a specified time period are bundled together and stored on this public distributed ledger and everyone on the network can see these transactions.

Features Of the POW

1. Security: POW is a reliable, fair, real-time, efficient, transparent mechanism that will ensure that transactions are executed and are genuine. Misbehavior from a miner in the POW consensus may result in being cut off from being allowed to add blocks in the future. Additionally, carrying an attack on the system would need a lot of money and computing power.

1. Consensus: When a miner authenticates a block of transactions, it broadcasts it to the whole network. Nodes leave whatever they are doing and check the blocks to make sure there is no double-spending because all the blocks are linked to each other, so no one can spend what they already spent. this brings about the agreement that the transactions do not contain fraud.

Challenges of POW

1. Impact on the environment: POW is very energy-intensive. Miners set up dedicated mining rigs which take up a lot of energy to play the guessing game, which consumes a lot of electricity and causes damage to the environment. However, many miners are now starting to use renewable energy to power their operations.

2. Inability to Scale: A block can contain between 100 to 1000 transactions, over a period of 10–15 minutes. At the peak time, the fee to send money over a POW is very high. Alternatives like VISA can do hundreds of thousands of transactions in just seconds. As many people get into crypto, it becomes impossible to use such a network. Developers have solved this problem on Bitcoin by making the lightning network that is an L2 solution for Bitcoin blockchain and Ethereum is switching to a Proof of Stake consensus to increase the speed and reduce the cost on the Ethereum.

3. No Penalties: In comparison with Proof of Stake, POW does not have Penalties for miners that try to submit fraudulent transactions and the worst that can happen is that you are kicked off the system. Where a Miner can create a new node and start again.

Apart from Bitcoin and Ethereum, POW is used by other blockchains such as Litecoin, Monero, Bitcoin Cash and so many others.

In conclusion, Consensus Mechanisms provide a solution for the double-spend problem on the Blockchain and also provide security. (insert link to video here)


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