What is Proof of Work Mechanism in Blockchain?

Farah Diana Patcha . August 22, 2022

Photo: Freepik.com

Techspace - As the products of Decentralization Finance (DeFi), cryptocurrencies have been filled with many methods within the transactions. The whole process of transactions involving cryptocurrencies is so complicated. One of the processes in the cryptocurrencies transaction is to verify the right transaction, without any financial institutions. Thus, the developers create proof-of-work (POW) to do the task. 

What is Proof of Work?

“The proof-of-work chain is the solution to the synchronization problem, and to knowing what the globally shared view is without having to trust anyone,” said the founder of PoW, Satoshi Nakamoto

Proof of work is a base of consensus algorithm to secure the transactions in the DeFi, established for Bitcoin at first. The consensus created by Satoshi Nakamoto allows the system to verify the transactions happening within the blockchain. To prevent any loss, PoW will help users to verify the transactions. The verifying process is hard, because it involves math and difficult puzzles as the task to pass the verify process. By the difficulty of the task, the users would not experience “double spending” mistakes or attacks that come from outside the network. 

Now, major DeFi beside Bitcoin also adopted this mechanism, such as Ethereum, Litecoin, Dogecoin, etc.

Even though PoW is popular for its security, this system is inefficient and brings a great impact on the environment, because it needs a lot of gas fees to support the process. 

Read also: What is Ethereum and How Its Works

How Proof-of-Work actually works?

As stated in the beginning of the article, PoW works to verify and record the transaction within the DeFi. And now, we’re going to look at how PoW works.

The first thing we should know is the fact that DeFi and cryptocurrencies exist on the blockchain. Blockchain itself contains a bunch of transaction records, or known as public ledger. To add the new record of transactions, the mechanism requires users to use hardware to process the transactions. After the transactions enter the PoW, it will get its specific hash. Next, the hardware as a miner should solve the task given by the PoW mechanism in a way to fulfill the target of the hash. However, the result of the task should not be more than the target given. When the hardware passes the task given by PoW, the new block containing the transaction record will be added into the blockchain. As a return, users who finish the process first will get cryptocurrencies for reward. 

To give a better understanding, here is an example of how PoW works. We’ll see from the Bitcoin system.

When a transaction happens in Bitcoin, it will be categorized in a block to be mined by the security system. After that, each block will get a hash that is generated by the Bitcoin PoW mechanism. Since Bitcoin adopted the SHA-256 algorithm, its generate a 64-characters of hashes for each block. 

After finishing the task given, miners who reach the target first can add the new block into the Bitcoin’s blockchain. In addition, they will get a Bitcoin reward as a return of newly minted coins and transaction fees. 

The thing we need to remember is Bitcoin aims its PoW algorithm to create a new block every 10 minutes. To carry out the performance, its PoW will manage the difficulty of mining based on how quick miners add their blocks. The quicker the mining happens, the harder the hash it gets. However, it’s possible to get an easy hash if the mining went slowly.

Read also: CeFi vs DeFi: Exploring the Advantages and Disadvantages

Pros n cons using Proof-of-Work

Proof-of-work is a great mechanism to verify the transactions because of its high level of security. Thus, the risk of loss is decreased. Its mechanism also allows a decentralized method of verifying transactions, which makes it simpler than any mechanism. PoW also gives a satisfying impact for miners to get their rewards after passing the hard process of verification.

As for the disadvantages, PoW needs a lot of energy to fasten the verification. Thus, miners need to pay more for gas fees for the faster verification. To mint in the PoW mechanism, miners are also required to use expensive kits in order to verify the transactions. 


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