Dec 13th 2022

Proof of Work is a consensus mechanism used by blockchains to verify transactions and add them to the existing blockchain. A blockchain is a publicly-available, decentralized ledger and lacks any central authority to maintain transaction records. PoW offers a way to make the blockchain the single source of truth for every user to agree upon.

Bitcoin, the largest cryptocurrency in the world, uses Proof of Work as its consensus mechanism.

Since the blockchain does not have a single central authority, it depends upon separate entities, known as miners, to verify all the transactions. A blockchain achieves this by sequentially publishing every single transaction. If any transaction conflicts with the already published transactions, it is reverted.

How Proof of Work Adds Verifies Transactions

The transactions are usually grouped and are published as a block. To publish a block, the miners compete to find a random number, known as a nonce, which fits the pre-determined criteria. In the case of Bitcoin, a nonce is a number that when combined with other data, like transaction details, and hashed with SHA-256, results in a string with a fixed number of leading zeroes. This process is known as Bitcoin mining.

The miners must be incentivized to maintain the integrity of the blockchain. Once a miner finds the nonce and publishes the block, they earn a fixed reward, usually in the native currency of the blockchain.

Proof of Work serves many important roles in a blockchain, including stopping the threat of double spending. Double-spending usually occurs when a user tries to spend the same funds twice. However, when a transaction spending the fund is already published, any contradictory transaction will automatically be reverted.