What is Proof-of-Work (PoW)?
Proof-of-work refers to a consensus mechanism that requires solving complex mathematical problems using extremely high computing resources and power to validate transactions on a network for a reward. This is basically how cryptocurrency is mined and how transactions are validated on the blockchain network.
PoW allows the possibility of secure, third-party-free transactions for many cryptocurrencies, including Bitcoin and Ethereum, based on the consensus algorithm alongside preventing the “double spending” of assets. More recently, Ethereum is working on making an upgrade to Ethereum 2.0 in a bid to boost security further using the Proof-of-Stake protocol
In summary, proof-of-work mandates that a substantial computational task is completed before successfully adding blocks to the network.
How does Proof of Work actually work?
Cryptocurrency transactions are not individually added to the blockchain; instead, they are grouped into chunks referred to as a candidate block. The block is passed through a hashing function to generate a unique block hash, after which the block is broadcasted to other users (i.e. miners) on the network to update the blockchain with the new block.
The process of passing the block through a hashing function to find a unique hash that satisfies the consensus protocol is the “proof-of-work” as it requires solving complex computational puzzles, high energy consumption, and heavy computing resources.
The reward for this work done is a new coin mined (Bitcoin, Ethereum, etc.) and issued to the miners.